Angling for the job of Treasury Secretary?
Lael Brainard, former Under Secretary of the Treasury for International Affairs in the Obama administration and elevated further by President Obama to the Federal Reserve Board of Governors (FRB), and thus a voting member of the Federal Open Market Committee (FOMC), where monetary policy is set, on Monday saved the global markets with a single speech.
Huge relief reverberated around the stock market that the Fed dove remained a dove, unlike another Fed dove, Boston Fed governor Eric Rosengren, who’d scared the bejesus out of the markets on Friday, when he mentioned two of the risks of “waiting too long,” including asset bubbles.
While totally blind to asset bubbles, Brainard, can see, however, the awesome job of Secretary of the Treasury that the rumor mill is already offering her in the “Clinton administration.” So she’s doing her darndest to impress Wall-Street darling Hillary. And sending actual money is one way.
It is perfectly legal for a Fed governor, or any other American, to give a maximum of $2,700 per election to a Federal candidate or their campaign committee. So no laws were broken. But in April, Bloomberg reported that Brainard had made a fourth contribution to the Clinton campaign, this time $1,950, which brought the total she’d contributed to the maximum allowed of $2,700.
But $2,700 isn’t nearly enough to elevate her to potential candidate for Secretary of the Treasury. Some extra credit is required – such as propping up the stock market with verbiage of free money forever.
Brainard was the last Fed head to do what she could to add to Fed flip-flopping before the Fed enters into the quiet period leading up to its policy meeting on September 20-21, when the fate of the world will be decided, it seems: whether to raise the fed funds rate by almost nothing from next to nothing, or leave it at next to nothing.
And so her speech on Monday that caused the S&P 500 to soar 1.5%, thus partially offsetting the swoon caused by Rosengren’s scary waiting-too-long speech on Friday, was full of possibly unintended ironies.
She postulated that the economy is now in a “New Normal” – the old normal as reconfigured by the Fed, a result of the credit bubble the Fed had created before the Financial Crisis, including the entire banking fiasco it was charged with regulating; and a consequence of the Fed’s efforts to revive the credit bubble after the Financial Crisis had blown it up. Thus the Fed has inflated the greatest credit bubble in history, which Brainard called the New Normal, and which now must be maintained come hell or high water.
This New Normal has five “key features,” she said, and they’re the “major reasons for caution” in raising rates, including:
“Inflation Has Been Undershooting,” at least for her tastes, she said. This is due to the great lengths that inflation measurements go to undercount it. For a lot of people living off real wages, inflation has been more than enough.
“Labor Market Slack Has Been Greater than Anticipated,” she said, apparently surprised that bailing out and enriching Warren Buffett and his financial and insurance empire and others who held the most assets since the Financial Crisis did not create demand in the real economy, nor enough good jobs.
“Foreign Markets Matter,” she said, “especially because financial transmission is strong and poses a risk.” She included this gem of real or fake central-bank benightedness:
Japan remains greatly challenged by weak growth and low inflation. Indeed, it is striking that despite active and creative monetary policies in both the euro area and Japan, inflation remains below target levels.
We’ve been lambasting these “active and creative” policies for years because they’re laying waste to the mechanisms of the real economy.
Like Rosengren, she talked about “headwinds from abroad,” but in her view, they “should matter to US policymakers”:
“[G]global financial markets are tightly integrated, such that disturbances emanating from Chinese or euro-area financial markets quickly spill over to US financial markets.“
Emphasis added. This confirms: financial markets are all that matter to the Fed.
They must be inflated – and kept inflated come hell or high water. Even if there’s a depression in the US, the Fed will try to keep stocks from inching down. It’s gotten to be a political thing, and for Brainard, a career thing. The Clinton administration is beckoning, and a market crash could help unwind that opportunity.
“The Neutral Rate Is Likely to Remain Very Low for Some Time,” she said, baffled that eight years of zero-interest-rate policy and three bouts of QE, totaling $3.5 trillion, which amounted to the greatest wealth transfer of all times (from labor, savers, and the future to those who held the most assets) has produced only “very modest” economic growth and not enough consumer price inflation.
Well, what do you expect as a central banker when you use rampant asset price inflation to undo the cleansing process the economy and particularly Wall Street needed, the process of shedding debt that would have allowed the economy to thrive afterwards? Yes, the fetid hot air would have hissed out of some of the assets that Warren Buffett and others so cherish, but the economy wouldn’t have been bogged down forever in Brainard’s version of the New Normal.
So who says the Fed can’t have fun at our expense? Read… The 11 Bone-Chilling Things I Gleaned from Yellen’s Chart
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The financial markets are dead. They were killed off in 2008 after a prolonged illness. What is left is a wealth extraction system for the dummies that don’t know any better. Buy a lottery ticket, you have the same odds of winning, and put a lot less of your money at risk.
Actually Petunia, the markets died December 1998 ( or was it 1999) when Mr Bill Clinton and Phil Graham allowed commercial and consumer banks to merge. LTCM was a trial run on the new bail out system. Of course, Phil now heads UBS and Billy has 2 billion to distribute to the ‘needy’, (worthy charity causes will have to wait). Note today that Goldman is now using retail savings accounts funds to ‘speculate’ with (Had no idea they waited so long). Indeed this explosion will have no grace period or Lone Ranger, Batman, ect. to save the day.
And from the story ““[G]global financial markets are tightly integrated, such that disturbances emanating from Chinese or euro-area financial markets quickly spill over to US financial markets.“”. As I have written here before, this is the failure of GLOBALISM and the danger it poses when all the eggs are in the same basket.
As for this position…Wolf, they have to keep it in the ‘family’.
Yes, another disinterested technocrat. No wonder the rubes are calling BS on the “trusted institutions.”
I think Lael is kissing behind and bribing / lubing the wheel hoping that Hillary will notice and give her Old Yeller’s job.
Sorry Lael as you need to contribute millions to Clinton Foundation AKA racketeering racket.
Lael Brainard is a member of the Rockefeller/CFR, along with Bill Clinton, Janet Yellen, and George Soros.
Some old Time robber Barron once said that he was not astonished that politicians could be bought….but that they could be bought so cheaply.
One can only imagine the controversy had a FOMC member been donating to the Trump campaign. What is legal may not show good judgement. Yeah, we know Bernanke is about as GOP leaning as one of these monetary charlatans is going to get but to try and undo Friday’s market fall while the Democrat nominee was stewing in some bizarre health issues is way over the line.
If Yellen is to preserve her institution’s credibility she needs to corral all of the cacaphony coming from Fed Governors. We don’t see this kind of speechifying from other Federal agencies or the Pentagon. Why is it that Fed governors, whose comments can have far more effect than a Deputy Secretary or Navy Admiral, is allowed to say whatever is on their mind?
“to say whatever”
Not so.
This is carefully choreographed behind the scenes, by the “real” owners of the country. As George Carlin said; “Forget about the politicians [and Washington] they are there to give you the illusion that you have a choice. You don’t”.
Nothing that occurs or is said out in the public eye, by the Fed “BigWigs” is by chance or by an offhand comment. These utterances are pre-planned and do not happen by “Happenstance”.
Yes. As FDR remarked, “In politics, nothing happens by accident. If it happens, you can bet it was planned that way.”
On 21 November 1933, FDR writes to Edward M. (Colonel) House, “The real truth of the matter is, as you and I know, that a financial element in the larger centers has owned the Government ever since the days of Andrew Jackson.”
House was an advisor to President Wilson who warned him against the creation of the Fed, and after it had been set up in 1913, he spoke the truth, which is clear today. “The Federal Reserve is the real (hidden) government of the United States Corporation. What is unknown to most Americans, is that Washington D.C. is merely the Federal Reserve System’s puppet.”
WolfStreet readers may want to check out today’s
http://www.wallstreetonparade.com
for further verification of this fact.
Because it is not a government bank. It oozes pure evil like a government institutions so I understand the confusion.
“If Yellen is to preserve her institution’s credibility”
What credibility? Credibility only among those swearing that the empress is actually wearing clothes, Unfortunately for the rest of us, they are the ones “in charge.”
Many of the the proles are finally beginning to wake up because the effects of the farce are finally hitting them severely in their wallets. Both Trump and Sanders are the evidence of that.
Had this been a 3rd world country, the whole currency would have imploded seeing how the guardians of money are not even maintaining the ruse of being neutral.
But this is the USA, land of “innovation”. I said this before and will say so again, H1Bs for central bankers.
And the house always wins, who’s house are we in?
HIBOR has taken off, liquidity squeeze in China?
…whether to raise the fed funds rate by almost nothing from next to nothing, or leave it at next to nothing
That’s almost Shakespearean. God knows we’re living in a tragedy.
Goo one Brad, you win my favorite post of the day award! A++++
Thanks, but the props go to Wolf for the clever turn of phrase. I was just calling it out.
One thing I don’t understand is why corporate America is hiring in this environment.
They are finally scared and they should be.
A little birdie told me this past weekend, that yokels in the midwest appear to be preparing for some kind of war. This birdie has insider perspective.
Smart yokels its coming Chicken
Window dressing for the election, and last days in office bragging rights. It is payback for gifts.
30 hour ( the new FULL TIME definition) work week, minimum wage, no benefits…that won’t break the budget, but it is good PR.
In any other kind of environment this would be labeled as conflict of interest, patronage and bribery. But where a voting member of the FOMC can unduly influence the markets and at the same time contribute the maximum allowed to a presidential candidate we are indeed living in a scandalous era. Perhaps on the verge of collapse.
As I wrote last week- the Fed governors are coordinating their speeches. The goal is to make the market worried that a rate hike might come on the 21st, but to keep them in enough doubt so that the market (the S&P500) doesn’t plunge back below 2100 before the meeting. Then, on the 21st, the Fed can again not raise rates, and the hope for them is that effect will have been amplified by all the back and forth between the “doves”. The hope is to get the S&P500 racing through the July/August highs, and, I think above 2400 to 2500 just before the election is held.
They certainly are an inbred crew in Washington. What I wonder is this: do they really believe that “this time is different” ? Or are they just desperate to hold on until after Election Day? There’s no way to tell. They remind me of Mark Twain’s chickens thrown in with a python. After the python eats the first chicken while the second one runs in squawking panic, the gorged python goes to sleep to digest the meal. The chicken calms down, then perched on the back of the snake goes to sleep as well. You people still in the market are that chicken, with a deadly serpent ready to eat you for breakfast!
Has anyone noticed that Atlanta Fed president Dennis Lockhart is ‘stepping’ down …….
just another King Rat jumping ship !! …… and, I’m sure, will be more than well compensated for his hallowed stint at the most venal pseudo-quasi U.S. governmental institution in modern existence !! Fuck these Farengi in human garb !
The fed can not raise rates because they can’t service the debt at increased levels of interest. That is the crisis in a nut shell. All those H1Bs will not provide the productivity necessary to make up the difference.
Petunia,
A hypothetical scenario;
The Fed raises to crash the markets.
Because – The “real” owners have finally realized that their candidate of choice has no chance of winning. Not after the latest catastrophic “medical episode” by their anointed one and next months announced release of more emails by wikileaks.
Crash the markets. Create as much social mayhem as possible. Have their present stooge-in-office declare nation wide martial law, which will suspend whats left of all remaining civil rights. Including suspending the election. In which case the present administration remains in office.
The “real” owners get to complete their agenda (WAR) and the present “chair warmers” in Washington get a final “bonanza” round of robbing the public purse. What say you?
Your scenario is possible, however, the peasants are paying attention and are more skeptical than they have ever been. The elites need to eliminate the debt and reset the economy, so a financial crisis is definitely in the cards. The next time the banksters are not getting away with keeping all the goodies to themselves, they are going to have to do a lot of sharing. Please notice that they are already outsourcing themselves to India. This is not a coincidence.
Yes, at last the peasants are paying attention especially the middle class ones, seeing their world shrink them into penury while those in charge feast and get super rich. Brexit happened because the ones in charge never thought to find out about the peasants’ thoughts. Now with two super unpopular candidates for POTUS it’s time for a reset. Unlikely, unfortunately.
Paying off the debts will not happen. Even paying off the interest is not going well, but it does depend on what “debts” are. A lot of the debt is just gambling money [derivatives and other insurance deals] The debts that are tied to resources are the ones to worry about, ones we are robbing from the future and consuming now.
That will be our big issue soon enough. The finite planet problem.
Hell, yes, your scenario is possible. But another is more likely: Instead of allowing free elections, they’ll create a threat, like Russian hacking, and the Department of Homeland Security or NSA will take control of the election apparatus, and we’ll have a staged election. Hillary will, of course, win. That will make a revolution or civil war less likely, at least for awhile. Then, Hillary will give some free shit to the masses, to calm them down awhile longer. Meanwhile, the status quo will continue until it doesn’t any longer. The collapse is coming, and it will come during the next eight years. Then we’ll see whether the shit really hits the fan with the masses. Hillary needs to be sitting in the Oval Office when it all unravels and people like Lael Brainard get pitch forks inserted into their private parts.
I used to think this was the stuff of fantasy, and I still think it unlikely. However, given the turn in the rhetoric of the Democrats- openly accusing Trump of being a Manchurian candidate with literally no evidence at all– suggest to me one of two things: (1) they think this is the only way to win, or (2) they plan to take action against Trump if he actually wins the vote in November.
Think about it- what do you do if, as the President, you have accused the president-elect of being a foreign agent? What are the expectations of your supporters who believed it all? Can you really climb down off that accusation and say it was all politics the whole time?
Man, you guys are a bunch of doomers. The economy is doing fine, wages are recovering. But, doom sells.
The rich irony, hypocrisy, of your post is that Republicans– including Donald Trump– have been calling Obama a Manchurian candidate for eight years running.
Amazing.
well written, interesting facts.
i think they’ll raise.
If they raise the housing market will collapse nation wide. Taxes will have to go up. Wall St. will be a blood bath. Just saying….