Have You Noticed How Push-Back Against Powell-Fed’s Actions Is Getting Louder in the Mainstream Media, from NPR to CNBC?

Still a lot of fawning coverage, but big dissenters are now given prominent spots, and loaded questions are used to politely hammer Powell into telling obvious nonsense.

By Wolf Richter for WOLF STREET.

This is an interesting turn of events, in a world of Fed-fawning mainstream media. In one version, the push-back takes the form of loaded questions about asset bubbles and wealth inequality caused by the Fed’s asset purchases.

Fed Chair Jerome Powell then answers, following what looks like a script because these loaded questions are now being thrown at him regularly. He admits that the Fed’s policies have increased asset prices, then says the Fed as a matter of policy doesn’t comment on asset prices, and hence cannot comment on asset bubbles, but then assiduously denies that this increased wealth of the asset holders, which he admits the Fed has engineered, widened the wealth inequality to the majority of Americans who hold no or nearly no assets, and who got shafted by the Fed. It’s like getting pushed on live TV into saying that, yes, indeed, two plus two equals three!

This happened many times, most notably during the July 29 FOMC press conference when a Bloomberg reporter pushed Powell on that (transcript of my podcast on the Fed’s role in wealth inequality); and during the interview with NPR which aired on September 4, when he was pushed on both, asset bubbles and wealth inequality.

In another version, the push-back in the mainstream media takes more accusatory forms expressed with exasperation and dotted with exclamation marks.

In early August, notable push-backers were former president of the New York Fed William Dudley and Bloomberg News which carried and promoted his editorial.

Dudley said that the Fed purchased these huge amounts of Treasury securities and mortgage-backed securities in March to bail out hedge funds, mortgage REITs, and others through the backdoor as the Treasury market went haywire. Hedge funds, he wrote, “were caught in an untenable trade of being long cash Treasuries and short Treasury futures,” and those highly leveraged huge trades began to blow up (transcript of my podcast).

And this, Dudley wrote in the editorial, “brings us back to moral-hazard problem: investors win during good times (they can assume more risk and earn higher returns) while the Fed and the U.S. Treasury (ultimately taxpayers) assume part of the downside risks when there is trouble in financial markets. This is likely to encourage even greater risk-taking down the road, making it more likely that investors and markets will need to be rescued in the future,” he said, adding, “This doesn’t seem to be a good road to stay on.”

And this morning it was CNBC, which interviewed hedge-fund founder-manager Stanley Druckenmiller on Squawk Box, which has a large audience, and the video spread across the internet, and most financial publications covered it, multiplying the reach of the message. And by airing the concerns of a famous investor, like Druckenmiller, on the show, CNBC spread the word far and wide.

Druckenmmiller didn’t get into wealth inequality, but he got into asset bubbles and the “massive, massive raging mania in financial assets,” as he said, that the Fed has caused, the “de facto MMT,” and how this was “dangerous.” Here is my transcript of portions of his take:

“I think the merging of the Fed and the Treasury, which is effectively what’s happening during Covid, sets a precedent that we’ve never seen since the Fed got their independence. And it’s obviously creating a massive, massive raging mania in financial assets, and as you just pointed out, Joe, it has not spilled over to Main Street.”

“I would just say that I hear a lot of people on the air lauding Jay Powell, saying he saved the world. And I do think that he did a great job in March. But I think the follow up has been excessive.”

“And I just want all you guys cheering him on to remember the Maestro in 2005, and how that worked out. Look, everybody loves a party,” he said, “but inevitably, after a big party, there’s a hangover, and right now we are in an absolutely raging mania.” He then goes on to explain just how crazy markets have gotten.

“And what the Fed has done, in my opinion, if you listen to the Jackson Hole speech on the framework, it’s quite amazing. It sounded like an apology because inflation has been 1.6% instead of 2% the last 10 years. Well, their mandate is price stability, where I think 1.6% is. They hit a home run. But they actually sound like they’ve been too tight the last 10 years.”

“And look what they’re risking in terms of financial stability to hit that 2% mark. My own sort of central case is that for the first time in a long time, I am actually worried about inflation.”

“De facto MMT, which is what we are doing right now, because we actually have the Chairman of the Federal Reserve – with a three-and-half-trillion-dollar deficit – out lobbying Congress to do more spending, and guaranteeing to those of us on Wall Street that he’ll underwrite it.”

“I think it’s dangerous. I think we could easily see 5% to 10% inflation in the next four or five years. Ironically, I think he has also raised the risk of deflation…. Every [deflation event] was proceeded by an asset bubble, and he has created this massive asset bubble.”

“So ironically, he has raised the two tails: The risk of inflation is much higher, I’d say, than it was 12 or 24 months ago; and the risk of deflation, I’m talking like minus 3 or 4%, because if things don’t work out, and we get a bust here, that is a…” He didn’t complete the sentence, and maybe that was a good thing. “I think the odds here of us hitting the sweet spot – which I would say is around the 2% area, which is where we’ve been – have actually gone way down with the Fed activity.”

Whether it is due to these forms of high-profile push-back, or whether it’s because the Fed actually has come to see on its own what it is fabricating with its policies, the Fed has effectively backed off already with its asset purchases. Its total assets peaked in June and have declined since then. And yesterday it disclosed that it had stopped buying corporate bond ETFs entirely back in July, and that it has almost wound down its corporate bond purchases.

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  251 comments for “Have You Noticed How Push-Back Against Powell-Fed’s Actions Is Getting Louder in the Mainstream Media, from NPR to CNBC?

  1. 2banana says:

    Wolf Contest.

    Finish the sentence.

    My submital – “that is a…end of the road scenario.”

    “So ironically, he has raised the two tails: The risk of inflation is much higher, I’d say, than it was 12 or 24 months ago; and the risk of deflation, I’m talking like minus 3 or 4%, because if things don’t work out, and we get a bust here, that is a…”

    • MarMar says:

      … depression

    • historicus says:

      Need “tales” not “tails”, right?

      • 2banana says:

        Ha! Either work for me.

      • andy says:

        Tails as in a bell curve distribution.. Two tails as probabilities of oposite events etc etc
        The Fed elevated chances of deflation while pushing inflation. And this is a total..

      • Steve M says:

        Not necessarily.
        One is more suggestive.
        At a bar for example, it’s better to end the night enjoying a “tail” instead of enduring a “tale.”
        Because if he’s talkin’ about raising that kinda tail,
        I know what comes outta that end,
        Whether you spell it “butt” or “but”

    • Rosebud says:

      The vast majority of dogs are humans now; multi dog-human families averaging two. Dog-human tail has been lifted. See the wag?

    • BatHelix says:

      It’s all just such nonsense…there are better ways to help people out and all of this is just an excuse to bailout corporate America by making it look like “complicated finance stuff” the average person doesn’t understand. It’s so frustrating because people here that pay attention and are interested know that it can only end badly but it’s also working for so long that it makes it impossible to confidently invest. I thought Covid had finally forced the issue but was wrong … so far… but our only choice is to invest in what you know to be a house of cards … or get zero return on your saved money. It angers me to no end especially since it would just be so much easier to do it the right way, let the bad companies fail and use market interest rates.

    • John Bridger says:

      Deflationary demographics mixed with Covid leads to deflation and wealth reduction for everyone. Can’t print your way to prosperity. So we either have deflation and defaults which isn’t ideal but is controllable or runway inflation which becomes jump ball for everyone including the very rich. Or maybe the rhetoric is going up because a group is hoping for significant market turmoil before the election in yet another stab at the Trump presidency.

  2. Rcohn says:

    I have consistently argued that given the extremely high GINI coefficient, the Fed’s hands are tied because any such actions will be perceived as giving money to the rich ,while everyone else suffers.
    If Mr Druckenmiller is correct about inflation , then anyone who buys or owns bonds at current prices will get annihilated. At high inflation rates the dollar will lose its status as “the” reserve currency with all of its negative ramifications.

    • Wisdom Seeker says:

      The Fed and FedGov can easily deliver monetary stimulus to Main Street. They just need to have that prioritized for them.

      The bigger problem is that the entire system is set up to skim a share of every transaction up to the plutocracy. So it doesn’t matter how much you pump in, the skim all drains out and Main Street gets bled dry regardless.

    • Harrold says:

      What could replace the US Dollar?

      Bitcoins?

      • The return of the Amero?

      • Saltcreep says:

        Harrold, in my language we have a saying that in times of need the devil eats flies.

        It strikes me as just too glib to suggest that the seeming lack of viable alternatives under current thinking translates into an irrevocable carte blanche for US fiscal and monetary authorities to engage in whatever level of domestic compensation mechanisms they please, whilst letting others take the consequences.

        I suspect there will eventually be some sort of phase transition as a response that catches everyone by surprise, unless some restraint is shown.

      • Cas127 says:

        Exact same arrogant question that printers of the holy Pound Sterling asked.

        • Apple says:

          The decline of the Pound went hand and hand with the collapse of British military power.

          Besides, it’s not like the Russian and Chinese Oligarchs want to keep their money in Rubles or Renminbi.

        • nick kelly says:

          By the end of WWI when the pound got in trouble, Britain had the most powerful military in the world. At the end it had 10,000 fighter aircraft, the only practical tanks and the only heavy bomber the Vickers Vimy, a few years later the first plane to cross the Atlantic. It also had the German fleet in its hands at Scapa Flow.

          The problem was financial. It had liquidated a third of the pre- war assets to pay for the war and like everyone else had borrowed heavily from the US. It was bust. With Churchill at Treasury it returned to the gold standard but pegged the pound at too high a level to be competitive in trade. Then came the Depression.

          For a modern day example of the now near total disconnect between military power and currency strength, look no further than Russia with a nuclear arsenal equal to the US and a ruble that lost half its value in a week requiring the CB to briefly raise its rates to 17%. Turkey is a similar but second- tier player with a currency that is a victim of its military spending and pretensions.

          In 1978 the US was the strongest military power but the near collapse of the US dollar, required it to issue bonds in Swiss francs, the currency of a country without any offensive military power.

          The fate of the US dollar may be affected by its military spending, (the size of the next five powers combined) but not for the better.

      • Suzie Alcatrez says:

        Gold of course!

      • Briny says:

        Okay, this is going to sound totally insane, but looking at who is holding what assets denominated in what, I’m picking Yen. Too bad I have nothing to wager with, ever.

        • Thomas Roberts says:

          That’s risky, because, many of the big Japanese companies, especially, tech have plummeting global market share. Alot of the remaining companies are centered around automobile production, which, will be likely to go through a rough period in the midst of a global recession/depression and a work from home era.

          But, everything is risky right now. We will have to put you on the guessing board for yen denominated assets.

        • Lee says:

          Re: Japanese companies

          Why in the world, if you are an individual investor, would you even be looking at large Japanese company shares to invest in?

          Ordinary investors are not ole gandad Warren with billions to put into the market.

          In fact, I’d suggest that any individual investor who buys the trading companies, large auto companies, or ANY Japanese bank shares deserves a low rate of return.

          In fact when you buy into those type of shares you are not really buying in as an ‘investor’, but as a partner with the Bank of Japan (via their ETF buying) and every other big fund that holds those shares.

          People need to look at the middle to smaller size Japanese companies in order to be able to make a good return on their investment. That is where the ‘value’ is in the Japanese market. You won’t be a partner with the Bank of Japan as they generally stay away from those companies.

          There are a lot of companies in Japan that have good fundamentals and good dividends.

          In fact there are about 240 or so companies listed on the various Japanese exchanges that currently yield 4% or more.

          And from an asset point of view, there are around 1800 or so companies that sell at a price to book value of 1 or less.

          Now, I don’t about every share market around the world, but I would think that there are few markets that have companies selling at around those kinds of yields and values.

          (Granted some of those companies are banks which I would cross off both lists immediately.)

    • M says:

      I do hope that the “Federal” Reserve cartel’s actions to funnel funds to its banksters and the ultra-rich get more and more scrutiny. Hyperinflation is the inevitable result of the current tactics, eventually: it was predicted before that US federal debt interest payments (not including the undisclosed $200 trillion-plus in federal liabilities) would match the defense budget in 2025. When will they match it now, after this pandemic, 2021?

      Our running room is rapidly vanishing. However, while I was more concerned in the past, I doubt that the US dollar will lose its reserve currency status under these present circumstances for a couple of years despite the rising inflation that the “Fed” caused and is causing. The US has been severely hurt due to negligence but most other countries have had the economic equivalent of heart attacks.

      China has lost credibility since the CCP gang members’ fraudulent schemes are being recognized for what they are more and more. (I had called them “cadres” but gang members is a more accurate term.) That economy is full of fraud: e.g., buildings that are shoddily built and even if some were well constructed, are either in undesirable locations or unacceptably priced.

      The CCP “legal system” rules in any way that the CCP leaders desire. Good luck getting justice there. Only fools or CCP cronies will invest there now or accept large amounts of their currency.

      The EU has Germany which is dependent on China, will it wind up with billions or trillions of uncollectible CCP IOUs? Other countries, whose economies have been hurt much worse and whose banksters will also need massive bailouts, will put the EU in a tight squeeze: it either creates money (Euros) or it puts huge burdens on Germany or it allows lower-tier EU countries’ banks to fail. The Euro may lose value dramatically, particularly if the EU dissolves due to these stresses

      Japan has kept its population shrinking due to beliefs that prohibit other groups from immigrating there. Its economy will continue shrinking for the foreseeable future. Its yen is the only reasonable alternative that I see to the US dollar but I doubt that Japan will distribute enough yen to allow it to be effectively used as a reserve currency.

      Thus, for now, while the EU is doing better than the US, it is still a team of horses in which each horse pulls in a different direction, with some horses that are economically lame. Given the recent admissions in the news, it is just such a shame, because if our leadership had enacted the rational, scientific, logical steps taken in Taiwan or other countries, our country would not have suffered anywhere as much and thousands would still be alive.

      • gregp says:

        What are all the fired military personnel going to do when the world stops subsidizing America’s wars of conquest and invasion (by buying and holding US$)?
        Are they going to settle Alaska? The Moon? Stopping military expenditure will probably trigger a Depression and the collapse of the Union.

      • Johnny Green says:

        What the Marxists through the democrats are trying to do is make the US much weaker financially with all their socialist, communist crap like UBI, economic restrictions and restricting business, movement and assembly, high taxes, out of control regulation from environmental to propping up illegal immigration, open borders etc.

        This way Europe looks better and trying to make that socialist crap hole look better and the ECB , Euro look like a less worse alternative than the US.

    • Thomas Roberts says:

      Rcohn,

      Right now, i’d argue that market concentration and lack of competition have had a much larger impact than the Fed, but, unlimited Fed money does help grow those oligopolies so … It’s hard to measure them. At any time the effects of the Fed’s policies could come, but, in theory, because, of China’s probable imminent economic downfall and potential war type actions money could pour out of Asia into America. At the same time the current recession/depression could bring down or cause enough of a loss of confidence in the eurozone, that some money from Europe could also come pouring in. All major assets classes available to the wealthy across the world are hugely overvalued, with the exception of more midrange land and real estate, which, would result in a big backlash, as is currently happening to a small extent. So as ridiculously overvalued as the U.S. Stock market is, I could imagine a 2008 type situation with a crash towards reality and then a massive higher than ever stock rally afterwards. Because of the work from home era starting and we don’t know what will happen in Europe, anything could happen. If enough money pours into America from outside America, the boomers retirements might be saved (for how long?), otherwise, they could be fu**ed. If the boomer retirements get saved, we might enter a weird twisted period that repeats part of the 2008 recession and it’s aftermath, with a slightly growing economy, growing unemployment, resulting from work from home, and lots of government money flowing around.

    • The Colorado Kid says:

      Rcohn, did you not hear about the other ‘tail’. Everybody is so friggen CONVINCED that we are headed towards Inflation. Reminds me of the first QE or Japan. It just ‘has’ to be Inflation!
      Haha, not even Stan the Man knows because let me let you and everyone else in on a little secret, NOBODY CAN PREDIT THE GODDAMN FUTURE. No one. but they keep on trying because they make money selling this forecasting soothsaying B.S.
      I’ll get off my stump now.

      • The Colorado Kid says:

        Oh, and the FED cannot do a, as Nouriel Roubini likes to say, “helicopter drop of money” because it’s against the Federal Reserve Act to do so. Unless Congress changes the Federal Reserve Act you can’t have your MMT.
        Now other CB are not so constrained, but at least RIGHT NOW, the FED can’t do this shit.

        • Fat Chewer. says:

          If the government breaks it’s own Federal Reserve Act, who is going to stop them? The government?

  3. BrianC says:

    The mission creep of the Fed has clearly created a two-tiered system of government. King Jerome rules with a clear mandate for the monied class. A dithering congress/executive for the rest us. I find this to be extraordinarily dangerous. If the interests of the powerful and monied do not at least align somewhat with the interests of the populace, no good thing can come of it.

    • Rcohn says:

      Qu’ils mangent de la brioche

    • historicus says:

      The Fed has self authored new powers and mandates and ignored the ones in place upon which their authority and powers are allowed.

    • sierra7 says:

      Brian C. (and others)
      Can’t put all the blame on “Jerome”
      We do still have a President, House and Senate.
      I don’t hear any outcry of “new ideas” on how to treat or prepare for the oncoming economic onslaught due to a crumbling economy and the sledge hammer residue of the global virus.
      So many have so many ideas on how and where to put their money but my endless question is:
      “How is this all going to effect the general citizens in this country or the globe?”
      Thru my eyes, anecdotal experience and family/friends stories, small businesses owners, gig workers, union trades nothing looks clear for the near future when all the support monies disappear.
      What’s the plan then?
      Downsizing in the small to medium size businesses is rampant.
      Hundreds of thousands of small and medium size ones are shuttering their businesses all across this country.
      “Gig” workers who were contributing to so many needs are desperately struggling to maintain some kind of status quo in their lives.
      Caregivers are overwhelmed with the death and destruction of this CoronaVirus with no real solution ahead except for the general population to remain isolated which only contributes to the decline.
      A food supply that is extremely vulnerable to disruption with a bit more infecting from the virus; the average distance for fresh foods transportation to urban centers is 1500 miles distance.
      Where are the small/medium/large municipalities going to get their financing to maintain basic services when the tax base collapses due to the crushing of all those businesses across this country?
      Where is the plan????
      The FED is not the United States.
      We have a legislative body that has no plan whatsoever to get us out of the coming tsunami.
      I just wonder if “Jerome” knows the price of milk and bread?

  4. David says:

    Its all well and good to complain about the Fed, but isn’t it too late to do anything about it? Are we not now in a Death Spiral that can only eventually end one way? I have heard lots of people identifying the problem. I have not yet heard one person explain how to solve the problem.

    • Skara says:

      Good point. Which suicidal Fed Chair is actually going to unwind the balance sheet?

      5% inflation or loss of reserve status for dollar are probably the only catalysts.

      • fozzie says:

        Too far gone to unwind without a debt jubilee.

        • Thomas Wolfe says:

          They wouldn’t call it a Debt Jubilee if it wasn’t fun right?

          Ok let’s say the US Treasury kicks the party off by announcing that they’re not paying back the money foreign nations loaned us, but they at least don’t opt for the far worse nuclear route of defaulting on domestic lenders. Great that was easy right? Except that every container ship headed our way would turn around and head back to home port cause the US is no longer a paying customer. At the same time UST yields go ballistic and the Fed must step in to buy up 100% of US Gov debt issuance plus all of those domestic holders who are dumping by the truckload. Wait, did you seriously think this would end the Fed? The Fed’s now the buyer of All resort. Their power and scope over the US economy and our personal finances is now limitless.

          There’s no more foreign demand for Dollars so it collapses inside of a week and consumer prices go up exponentially as shortages of everything occur at the same time that the Dollar’s rapidly losing value. After a ‘sell everything’ panic, Gold and Silver maybe dumps but then goes stratospheric; Yay! But when it comes to actually buying anything with it over the short-term your average Joe wants physical cash not precious metals because, after all, that’s all he’s ever known. Hope you have several years of cash laying around because your job’s likely toast while the UBI being doled out is far too little to make ends meet against a tidal wave of inflation. Since prices will be skyrocketing, a good rule of thumb might be 5 years of cash living expense + UBI will last you around a year.

          What does all this end up looking like after maybe half a decade? Well you got a worthless local currency, the central bank monetizing everything, no import/export channels and local producers bankrupt after the US Gov implemented pricing fixing.

          The only thing a Debt Jubilee accomplishes is the end of the US Government’s ability to pawn off worthless Dollars in exchange for real goods from the rest of the world. It’s the equivalent of turning off your main circuit breaker because you don’t want to put next month’s electric bill on a credit card.

    • Mark says:

      “We all know what to do, but we don’t know how to get re-elected once we have done it.”

      Jean-Claude Juncker

      • KurtZ says:

        Nobody can defeat the Baby Boomer’s deflationary monster now, just keep locking the gates and singing at the top of their lungs….. their favorite mantra…

        Cheeseburger in Paradise!

    • DeerInHeadlights says:

      True and it requires courage to do it and that’s in very short supply among leadership, political and economic.

      • MonkeyBusiness says:

        Courage is in short supply everywhere, not just in leadership. Sheeps by definition don’t have courage.

        • intosh says:

          Courage is demanded only from poor suckers (those sent abroad to “protect America’s interest”, for example).

      • historicus says:

        When vice prevails and the impious hold sway, the post of honor is a lonely station.
        Who will stand up, other than men with a last name of Paul?

    • cb says:

      End the FED. No mystery.

      • historicus says:

        Hold them to their mandates.
        Stable prices…you may not promote any inflation or deflation…only stable prices…get it?
        Promote moderate long term rates, not record lows which by definition are immoderate.
        Simple.

        • MonkeyBusiness says:

          Prices are stable …. for the rich.

          Mission accomplished.

          “Stable prices” is so vague and might just be someone’s wish, it’s hard to know what it’s supposed to be.

          Remember stable prices != same price year after year.

          Stable prices is impossible. Just end the Fed.

        • Frederick says:

          Nope , like cb said

        • Happy1 says:

          They cannot be held to their mandate, they have chosen a fake inflation measure that vastly underestimates real inflation. End the Fed.

      • flashlight joe says:

        “End the FED. No mystery.”

        The leach is sucking up our blood, as planned.

  5. Eric Desmond says:

    Quiet! Quiet! Go ask Gyna!

    Wolf,
    He’s just trying to get poor people jobs… by making risky asset holders more than whole again on the future taxpayers dime. Stop being such a buzzkill and drink the MMT kool aid. a-Me!!!!-rica’s US dollar will always be the world reserve currency, BELIEVE ME! Just need a little more easy money to defeat the virus and get the GDP growing at 6%.

  6. MonkeyBusiness says:

    The Fed understands that the only way to make America Awesome Again (Triple A) is to destroy it.

    You guys complain too much ;)

    And Druckenmiller is just a sore loser because he and Soros ticked the top of the market way back when (2000), and I bet ya, he’s also missed the current rally.

  7. Buddy says:

    Do you really believe the largest US retailers will accept inflation and simply pass the additional cost onto their customer bases? We are living in the 4th industrial revolution; businesses will use automation and AI as a hedge against inflation. The Fed may get the inflation they desire, but it will come at the cost of the American workforce.

    • Wolf Richter says:

      Buddy,

      “The Fed may get the inflation they desire, but it will come at the cost of the American workforce.”

      Yes. That’s how it will likely work out. That’s how it worked out over the past 40 years.

      • RickV says:

        “Yes. That’s how it will likely work out. That’s how it worked out over the past 40 years.”

        I would submit it goes back further than that. In the 1940s after WWII, from 1946 forward the US ran double digit inflation rates through the mid 50s, thus generating a 50%+ inflation rate over the period while the GDP advanced strongly. This inflation allowed the US to reduce its debt to GDP ratio, about as high as today, to a bearable rate which was further reduced by economic growth during the period of the 50s and 60s. I believe this scenario is what the Fed is attempting to engineer now, although they haven’t announced it yet.

        • wkevinw says:

          “In the 1940s after WWII, from 1946 forward the US ran double digit inflation rates through the mid 50s, ”

          Sorry, no.

          Year CPI
          1944 1.7
          1945 2.3
          1946 8.3
          1947 14.4
          1948 8.1
          1949 -1.2
          1950 1.3
          1951 7.9
          1952 1.9
          1953 0.8
          1954 0.7
          1955 -0.4

      • raxadian says:

        Don’t you mean 50 years? As soon as the USA had a man on the moon they decided it was gonna be the American workforce that was gonna pay for it. In the eighties they just got blatant about it and people was no longer on drugs like in the seventies, so they finally noticed.

      • sunny129 says:

        ‘And yesterday it disclosed that it had stopped buying corporate bond ETFs entirely back in July, and that it has almost wound down its corporate bond purchases’

        Wolf,
        Does this mean there is NO LONGER back stop by Fed on Corp Credit Mkt if it starts cratering? Number of Corp bancrupties are on record in August! I doubt very much their words vs their actions.

        • Wolf Richter says:

          My gut feeling is — without a scintilla of evidence to back it up — that they will let individual companies fail, no problem, and Powell has said so. But if the credit market freezes up, or threatens to freeze up, they will step it.

          So this would mean there is a back stop for the credit market overall, if it freezes up, but if companies that are insolvent file for bankruptcy, that’s just fine.

    • wkevinw says:

      “The Fed may get the inflation they desire, but it will come at the cost of the American workforce.”

      That is how it has happened in the past few decades.

      Where there is (“economically”) scarce labor, prices for labor rise.

      Globalization of many markets will have to stop for there to be “beneficial” inflation (mostly increases in working class wages in the developed countries).

      See many discussions on open borders (part of the globalized labor market) and welfare states (social security, medicare, medicaid, AFDC, school lunches, school breakfasts, public/taxpayer-supported schools, etc., etc.).

      • Paullb says:

        Inflation is just a hidden tax. It affects people who get paid in currency the most: the working class and the creditors. Because of the latter, the owners class will never let inflation run out of control. Of course I am referring to the poor man’s inflation – in necessities, not in assets. The Fed will discover a better way to measure it as soon as the creditors start collapsing.

    • rhodium says:

      In that scenario though, if automation and ai are truly cheaper than employing a human and extensively utilized, you should theoretically get heavy deflation in competitive markets as both prices and wages face downward pressure. Ability to pay also factors into downward pressure if wages fall or fail to rise. The only ways I can see inflation from this scenario is 1) war/exogenous shock affecting supply or 2) massively increasing profit margins in non-competitive markets with people simply being able to afford less at the price to wage ratio. I believe over the long-term if technology delivers, that heavy inflation would have to be mostly the result of deliberate underproduction in line with profit seeking behavior when and where it can be achieved.

      • 91B20 1stCav (AUS) says:

        Rhodium-see Harley-Davidson after the AMF (remember them, bowlers?) years (’80-90’s) for a textbook case of ‘deliberate underproduction’. Was the pricing inflated, or necessary to offset U.S. labor costs? Smart and profitable, without a doubt, in either case. (These days? Oh, how the mighty have fallen…).

        May we all find a better day.

  8. Michael Engel says:

    1) Aug 1914 – Aug 1916 : Charles Hamlin. Term expired.
    2) Aug 1914 – Aug 1922 : W.P.G Harding. Term expired.
    3) Aug 1922 – may 1923 : nobody.
    4) May 1923 – Sep 1927 : Daniel Crissinger.
    NY Fed cut rates to please GB exchquer. The Fed in chaos/ Crissinger resigned. NY Fed Benjamin Strong died a year before his bubble pricked
    in 1929.
    5) Oct 1927 – Aug 31 1930 : Roy young was fired/ no fault of his own.
    6) Sept 1930 – WAPO Eugene Meyer resigned in May 1933.
    7) May 1933 – Eugene Black resigned in Aug 1934.
    8 ) Nov 1934 – Jan 1948 ; Marriner Eccles.

  9. Wisdom Seeker says:

    It’s more than a little ironic that Dudley is all sanctimonious now, but when he was the team making the same sorts of decisions a few years ago, he was always in favor of feeding the bankers. It’s not like things have changed, the trend has been obvious since before 2005…

    • Wolf Richter says:

      And Powell actually had concerns about dragging out QE when Yellen was still in charge…

      • historicus says:

        What changed Powell in December of 2018?
        He actually achieved “normalcy” with Fed Funds equal to or in excess of inflation. (Circa 2.25%)
        Then he absolutely caved.

        • Bobber says:

          I think when the stock market is falling, you have everybody – Treasury Secretary, President, legislators, CEO’s, lobbyists, banks, media, etc. – crying out that the sky is falling. They all look to the Fed to end the pain, so they can continue their ride on the gravy train.

          A good Fed chair has a backbone. Powell found out his was missing.

        • Old School says:

          Hard to believe I got a 5 year CD at 2.80% then. I kept waiting for 3%, but figured correctly it just wasn’t going to happen.

      • sunny129 says:

        Mr Powel has declared clearly that he would ‘anything’ to keep the Mkts ‘functioning smoothly’, aka keep the bubble up at any cost! He went back on his own statements on record in 2013!
        He is a certified ‘hypocrite’ just like every one in FOMC!
        They all got selected to serve top 1%!

        • sierra7 says:

          Sunny129 (and others)
          Where is (a) Paul Volcker when we need him????
          And yes, Mr. “Jerome” failed in the fall of 2018. Completely!
          At least he could have gone down “swinging”!

  10. Groucho Marxist says:

    I keep expecting an Andrew Jackson type political figure to arise and subdue the central bank.

    Alas, there is nary a peep from either side of the aisle about the Fed and it’s “independent” actions.

    The older I get, the more I realize that the notion of history repeating or rhyming is just not true.

  11. MCH says:

    Wolf,

    Is this basically an article about the failing of the mainstream media? Cause the other stuff, we’ve more or less known about ever since February when JP slashed interest by 0.75%, quickly followed by a drop to zero, and then the endless insane monetary policy that you’ve documented here.

    Because no matter how anyone spins this, it’s not a good look for them, ranging from the NPRs to the CBNCs. Either the mainstream media is composed of a bunch of idiots who expound endlessly on their preferred point of view without ever realizing the facts and consequences of all of these governmental actions.

    Or the mainstream media is deliberately choosing to manipulate the information by emphasizing certain things and completely forgetting about the others so that they can “manage the narrative, and manage the masses.”

    To put it in another way, either they’re all stupid, or they are all deliberately lying to us except when its convenient to not do so.

    I suppose there is always the third option, they are both A and B.

    I’ve long ago lost my trust in the US media. While they claim to value the truths, at best, they are mostly ignorant, and at worst, they’re a bunch of liars. The only difference between them and the Global Times in China is that the latter at least is courteous enough to let you know they are a mouth piece of the Chinese government and don’t pretend like they are giving you the facts all the time.

    • DeerInHeadlights says:

      This. I go through 10-20 sources/websites/podcasts on a rolling basis to get the information I need. No source is completely unbiased, humans just can’t be so. However, the sheer dishonesty of the mainstream U.S. media is just revolting, all fueled by money and little meaningful regulation.

      • Cas127 says:

        “the sheer dishonesty of the mainstream U.S. media is just revolting,”

        True, but some comfort can be taken in their rapidly waning influence.

        Look at the tiny P2 ratings of every cable network (in a country of 330 million)…

        https://www.thewrap.com/115-cable-channels-ranked-by-2019-viewership-yes-comedy-tv-is-still-dead-last/

        30 min Bcast news slots maybe still get 5 or 6 million…but they lack the saturation propaganda effect of the cablers.

        And there are dozens and dozens and dozens of website alternatives to the broken down deceits of the MSM.

        The MSM’s decades of deceit still have a legacy effect, but it diminishes greatly with every passing yr.

        (The same can’t be said of the toxic, doomed policy outcomes their multi-decade media oligopolies cultivated/shielded).

        Don’t confuse the manufactured binary choice in US politics for continuing belief/faith in MSM bullsh*t…those are two largely separate issues/problems.

        • Mary says:

          It’s not hard to find reliable sources of information and analysis that aren’t beholden to mainstream thought control. All of us managed to find Wolf Street, right?

        • Wisdom Seeker says:

          Mary, if you have other reliable sources I’d love to know about them.

      • “Same as it ever was”
        “The truth is out there”…but you have to work for it. That never changes.

    • Petunia says:

      It’s A and B, stupid liars.

      • wkevinw says:

        Petunia/All- Ha! I have always said one political party was stupid and the other liars.

        That’s how it goes.

        • RickV says:

          Sorry it only ads up to 46.2% not 50%. Didn’t realize the precision to post on this website (and I accepted your numbers without a source).

    • economicminor says:

      Even NPR needs the Big corporations to fund their operations as their base has been devastated by both the actions of the FED and the FedGov. The media tells you what their owners/funders say. Just like we don’t have free markets, we don’t have a free press. This extends beyond finance. We are being fed propaganda and most people just accept it. Though when something can’t continue, it will stop. Let me know when we’re there.

      • Wisdom Seeker says:

        Re “We are being fed propaganda and most people just accept it.”

        Accept it? No, they merely tolerate it. Another form of entertainment, now.

        Meanwhile, people do form their own opinions, since lived experience is still far more powerful than media chatter.

        P.S. The media were about equally biased (all over the place) 100-150 years ago, and we survived.

    • Happy1 says:

      MSM has completely failed on the Fed.

    • Lee says:

      Well, I wonder if the problem with the MSM is that the current crop have been ‘educated’ at US universities?

      In any event, I doubt that many of them the skill set needed to understand economics, finance, or anything to do with the military or national security.

      They sort of remind me of a lot of police detectives – some of whom are still working today – they don’t look for a suspect, but fit the crime to the person they are looking at. Read it in numerous cases files and seen it happen in real life too.

      And the mess is found all over the place.

      Today I was reading a couple of annual reports from Australian companies in the oil sector. The price of oil has been on a roller coaster over the recent past and is IIRC down about some US$20 a barrel over the past year.

      One is a fairly big producer and the other has found some huge deposits awaiting production.

      One would think that based on the change in the price of oil that some adjustment to the carrying value of these oil and gas properties on their books would be needed, but no, neither company has taken any charges and actually stated that the price of oil and the current market has had no impact at all on them…………

      Really?

      So why are they putting off or reducing capital expenditures if there was no impact?

      And of course not a peep in the financial press about either of them even though numerous other companies in the sector are taking huge write offs including one that is a partner in a huge project……..

  12. DeerInHeadlights says:

    I’m not so sure mild-mannered criticisms will sway a group of people with no moral compass. It’s native to expect that to have an impact, IMO.

    So the dip has been bought nicely, as expected. Sure markets could trend lower tomorrow but I don’t expect massive red days again for the time being.

  13. fred flintstone says:

    The fed will do exactly what it has stated to get everything back in order.
    They will allow inflation to roll thereby reducing the debt considerably. Allow the dollar to drift lower providing US companies cover for incompetent leadership but increasing US employment and reducing the trade imbalance.
    The mirror generation is on us so home buying is already moving up considerably.
    When things get to some sort of balance and US savers have taken it in the shorts…..worse than now…..they will begin to raise rates.
    Thereby having completed the greatest transfer (theft) of wealth in history…..from the savers to the business class and workers.

    • Wisdom Seeker says:

      @Fred, “They will allow inflation to roll thereby reducing the debt considerably.”

      Except they CAN’T achieve this, because the Fed’s only tool to create inflation is to add debt by buying Treasuries.

      The only debt-reducing inflation is the kind where workers get more actual money in their pockets… and then choose to reduce their debts. And that money has to be minted or printed and not be swapped for any kind of debt whatsoever. Sadly unlikely without a major revolution in popular attitudes towards debt. “Credit/Debt revulsion” is what we need and are not seeing yet.

      • SnotFroth says:

        Probably why the Fed wants Congress to start spending. It seems if .gov launches big fiscal stimulus and jobs programs, funding it with near-0% debt gobbled up by the Fed, they’ll get plenty of bottom-up inflation. At last, gravy for the ignorant masses! And if CPI hits something like 4% the value of that 0% debt will be eroded nicely over time. Good thing they don’t need actual investors to buy bonds anymore.

    • Lee says:

      Nah, they have a ways to go match the interest rate supression that was undertaken by the Fed during the eight years of the Obama administration.

      A blip in real interest rates was knocked back as soon as people were seeing an increase in income.

  14. Paulo says:

    I am also seeing more in the news commentators saying that the stock market is not the economy and how mostly the wealthy buy/own stocks.

    Hope you are enduring the smoke okay Wolf. I’ve been through it myself a few times in the north and it can be pretty bad. Actually, I guess this applies to many many here on WS. Hang in there you guys/gals and may the fires die out before too long.

    • Wolf Richter says:

      Paulo,

      Thanks for your thoughts. The fire season is over when the first big rains come, if any… They may come in Oct. at the earliest. So yes, we’re going to hang in there, along with everyone else. Like a hurricane in Texas, you just gotta deal with it.

      Thankfully we’re not affected by the actual fires that are just about everywhere. My heart goes out to those people. Quite a few readers here, such as “Thomas,” live in affected areas and may have to evacuate, or have already evacuated.

      Right now, the smoke is up high. That’s why it’s dark here in the middle of the day and red. But down where we breathe, the air isn’t too bad. This is a new thing. Over the past few weeks, the smoke has been low, and the air was horrible much of the time (though there was usually a window in the afternoon to early evening when the breeze blew it inland).

      • MCH says:

        It feels like we’ve entered into hell…. heh heh, but I’ve been told that Northern CA was like this around the Mt St. Helen’s eruptions too.

        Hopefully it’ll get better soon. I know there is a subset of people who wish CA was more like Beijing (yes, somewhere there is that), but I’m sure they don’t mean it this way.

        • Russell says:

          You’d think the environmentalists would finally learn and let you do some controlled clearing instead of leaving it up to mother nature. She can be a mother!

      • nick kelly says:

        I have noticed the MSM getting more edgy with Powell and I think in large part because of Wolf Street pounding away at the Fed’s role in asset inflation etc.

        • VintageVNvet says:

          That is a possibility, though slim IMO nk.
          The reality is more likely that the MSM has now realized that JP is most likely obeying the dictates of DJT, and are jumping on JP to continue their war against the current pres, hoping this election to be able to substitute another senile crook of their choosing, as they tried and failed to do last time.
          Does this seem like ”deja vu all over again?” YES it does.
          At age 75 and always registered and voting independent, I really and truly wish all these old folks would go home and shut up and let the younger folks take over.

      • sierra7 says:

        RE: fires:
        Had to do the mandatory evac order two weeks ago due to the “MocFire”. It was horrible! Drove from foothills in the Sierras thru smoke so thick you could cut it with a knife. Traveled to daughter’s home in Los Banos. Expected to at least see some clearer skies by arriving in the valley (Modesto) or even Los Banos but the quality of air was also terrible in both places.
        Stayed away for a week; returned to more terrible air quality from the newer ones and the ongoing, still uncontained Creek Fire.
        CA, Oregon and Washington are suffering from historic wildfires; CA in 2019, approx 150,000 acres or less burned; this year over 2M acres!
        We need rain!

    • Memento mori says:

      You are correct, look how the market is not responsive to the real economy but to the federal reserve policy.
      This is a totally backwards the situation.
      The market jumps huge with every fed word, while the real economy doesn’t change very much. We need to get rid of the neoliberal markets rule thinking with an economy rules thinking.
      That requires structural changes in the architecture if the financial system. It’s not going to happen.

      • Old School says:

        I am seeing more talk of the bubble. To me the real sign is some of the large tech companies having price to sales greater than 10.

        I saw that during the first tech bubble one CEO (Scott McNealy I think) got on CNBC and tried to explain how it was impossible for his company to be worth 10 times sales. The numbers just can’t work if your company is mid to large size.

  15. Harrold says:

    Frank, thanks for that report from Alex Jones’ InfoWars.

  16. Duane says:

    Peace and prosperity thru asset price inflation. Monetary policy so easy even a caveman (named Jerome) could do it.

  17. Just Some Random Guy says:

    Powell saved the world’s economy and you guys are mad. Sometimes people make no sense.

    • Wolf Richter says:

      Just Some Random Guy,

      All he did was save your portfolio. Nothing to do with the world economy, though it may look like it to you since for you, “my portfolio” = “world economy.” So cheers!!

      • sunny129 says:

        +1

        Like Barnake was called a hero by Atlantic magazine for saving the economy/world.
        Wonder. without 7 Trillion and change, what would they have done?

        The final chapter on this ‘spending debt on debt’ as a panacea as a solution to our financial problems (public/private) is YET to be written!

      • Just Some Random Guy says:

        He saved my portfolio and the portfolios of millions of others. Not to mention tens of millions of jobs. Only people who “suffered” via his actions are bears/shorts who for.et the #1 rule of investing…DO NOT FIGHT THE FED.

        • Wolf Richter says:

          Just Some Random Guy,

          Do you not realize how ridiculous this sounds in a capitalist free-market economy? You’re talking about an economy and markets planned by the Fed, where a few people set the values for what should be market prices — including the price of risk. That’s the worst of all possible systems. It’s completely nuts.

        • RightNYer says:

          Part of me wants the entire financial system to crash so people like you get wiped out. I’ve never seen such ridiculous myopia.

        • Happy1 says:

          Wow. You think your investments don’t depend on the performance of the companies? You think the Fed can manufacture profits? This will not end well for you.

        • Karen96 says:

          Lmao. #1 rule in USSA: don’t fight the Central Planning Committee. You call that investing?

    • economicminor says:

      29+million are collecting UI on borrowed money. Rents aren’t being paid, mortgages either. Food lines are more than double. Yeah Powell saved the world. Like living large on your credit cards. All’s good Until the bill shows up and you can’t even make the minimum payment. What will things look like then?

      • CRV says:

        Makes me think.
        In the 1960’s the French President Charles de Gaule, called the US’s bluff by wanting to be payed in gold. It made the US go off the gold standard in 1971.
        What can the US do now if the bluff is called again? Go off what? There’s nothing. Selling real tangible assets? In exchange for other fiat currencies backed by the US dollar?
        It will just be the end of the party.
        And “in gold we trust”.

        • VintageVNvet says:

          Not only that crv, but De Gaulle also suckered John Foster Dulles, SecState for Ike, into taking over for the French in VN after their elite troops were wiped out by the NVN army, as he could see the end of that particular colonial situation and didn’t want any part of the mayhem that eventually proceeded there.
          De Gaulle was smart, brave, and very patriotic person, who although he certainly helped himself, he also helped France and the allies a TON.

      • Happy1 says:

        No he didn’t “save the world”, a financial reckoning can only be postponed, it will eventually be catastrophic, he’s just trying to push it off to his successor, like they all do. The model is fundamentally flawed and we must end the Fed. A reckoning now would have shaken out the gamblers and allowed real wins for the prudent.

    • Cas127 says:

      Continuing to ruin the store of value function of the USD isn’t “saving” the country…it is making its medium term ruin more certain.

      (Way too late in DC’s degenerate day to say “long term”)

  18. The money is already in the system. The monetary base is at record highs. There is no push back against money already printed. The political game is to keep Congress from apportioning that money, meanwhile the Fed monetizes directly, and provides funds to Wall St. No way the Feds balance sheet is going to ten trillion, unless the deficit hawks control the budget process. Either way Dow 40K before you can spit.

    • economicminor says:

      Yet the velocity of money is at decades low.

      Money is all in the hands of the few.

      • suny129 says:

        M2 has zoomed up but velocity has dived since 2000!
        As the DEBT increases, velocity decreases!
        They keep trying to use more DEBT to cure the ills of debt!

        Go Figure!

  19. polecat says:

    “This doesn’t seem to be a good road to stay on”

    Right you are William … even though you were (are??) a part of the Fed that pushed forward this sh!t! What YOU .. and your brethren in Bansterdom don’t seem to get .. is that at some break-point, redress will come, as a result of those indifferent policies inflicted by such by the likes of you fine folks, toward the un-annointed .. to the point where the roads lead the tumbrels on which the financialzing wizards stand, to a different point of view.

  20. Peacefuldaizy says:

    The right wing and the left wing belong to the same bird. Republicans are part of the problem. Stop buying the nonsense that one party is the problem.

  21. Petunia says:

    It’s getting hard for the MSM to ignore all the homelessness and civil unrest. I don’t see how anybody could expect inflation over the long run when nobody has a job, a home, or money. Saks Fifth Avenue and Neiman Marcus don’t look so good boarded up as well. It’s impossible to spin the decline.

    • MCH says:

      That’s why it isn’t reported. How often do we see CNN broadcast the “peaceful protests” in NYC or Portland? Or about the young rich upper east sider smashing up Starbucks?

      BTW, the only reason Fox broadcasts it is because they have an agenda too, and no, it has nothing to do with the guy in office, it has to do with catering to their audience and ensuring the ad dollars.

      • Petunia says:

        Fox’s agenda and need for revenue doesn’t make the news less true.

        • MCH says:

          No, you are right, but they will happily deemphasize the news that doesn’t fit with their narrative. Their news operations were better but they still cherry pick.

          Don’t get me wrong, I don’t discriminate in who I target. They are all frigging guilty of the same crime as far as I am concerned.

          Which is to carve up this country like a roast for the ultra liberals and the Uber conservatives… and worse than that, their Biggest sin is making me have to check more than a couple of sources to get some semblance of facts… wasting my time.

          I for one would support WNN. Need I go on about what the acronym stand for?

        • VintageVNvet says:

          That is less than true Pet, due to their continuing editing, emphasizing, and especially opinionating, as does every human and human communication effort always.
          In order to get one’s ”truth” writ small, one must go to a wide variety of sources of information, widely politically and geographically, and then sort and edit and aggregate that information oneself, with as much attention to one’s personal biases as one can become aware of.
          ”TRUTH” writ LARGE is an entirely different matter, as has been considered and argued for eva by each and everyone who has/had the nerve to publish to the public, and probably every other one who has had any thoughts on such truth, if any.
          Crichton has some interesting comments on those truths in the notes and bibliography of his book, ”State of Fear.”

        • Russell says:

          It’s really sad when my best news sources are foreign. I used to trust Aljazeera but they have been using American journalists recently and we know how biased they can be. Any suggestions for good, factual news?

      • Lee says:

        The MSM here in Oz is just as bad.

        We have two newspapers here in Melbourne: one is a left wing rag and the other a center to a little right. Then there is the national newspaper and the national financial rag as well.

        With our libraries closed the only way to read a newspaper is to buy one from the newsagent (or subscribe), or go on the Internet. We have a small branch library in the village which gets the the three general papers and where I used to go read them.

        No idea when the libraries here will open up again. Soon I hope.

        For some reason the left wing rag is basically free to read on the Internet whereas the other one charges in order to be able to read anything.

        So I read the free one and often wonder what planet I’m living on.

        If one reads the same story in other media outlets it is often completely different and important facts and other information is left out in order to ‘support’ their opinions.

        It isn’t news, it is propoganda in order to support their position.

    • Harrold says:

      Neiman Marcus declared bankruptcy months ago.

      Private Equity has just about bled them dry.

    • cb says:

      Homelessness and civil unrest in no way prevent increasing the money supply (inflation).

      Interest rate suppression and money expansion. That’s the FED’s game.

      • Petunia says:

        The money supply creates inflation only if it is circulating in the economy. Boarded up businesses don’t circulate money, civil unrest doesn’t contribute to consumer spending, joblessness is deflationary, vandalism is deflationary, homelessness is deflationary.

        The fed’s one and only job is to keep the banks liquid and open. It’s their only mandate. If their mandate was different we would have a different outcome, like full employment, and wage inflation leading to actual inflation. But we don’t.

        • andy says:

          Empty shelves create inflation like you wouldn’t believe it. Price controls work even better.

        • cb says:

          Petunia said:

          I’ve seen and heard this stated many times. I have never seen it substantiated, and it makes no sense.

          First, it is an increase in money supply that is inflation. The money supply is larger ………… hence inflated.

          Second, how does new money supply not circulate in the economy. Once the money supply is increases, is it not by definition in the economy?

          It’s too bad we have corrupted the language to confuse the difference between an increasing money supply (inflation), and rising prices due to an inflated money supply (theft).

          You may be right about the FED’s job. I see their job as that of garnering wealth for their owners.

      • khowdung Flunghi says:

        As for doing anything about the homeless, this is a headline from today’s Los Angeles Times!

        “Housing costs for the homeless rose to $531,000 a unit, L.A. controller’s report says”

    • Paulo says:

      It isn’t just the US or big cities. There is homelessness everywhere these days. In a nearby city to where I live on Vancouver Island (city population 40K) there are homeless camps that come and go, with the latest one out of town about 5 miles. Lots of drugs and petty crime goes along with it. I see people urinating in broad daylight behind trees or buildings in the downtown core. And we actually have a good safety net system.

      It started with shopping cart people about 15 years ago. We called them ‘gleaners’ as they scrounged for cans. There used to be enough resource jobs around someone unskilled could do to get back on the wagon or on track. But nowadays, God help anyone without a family who tries to climb out of the gutter. Add to that fentanyl and look where we are.

      Protests will wind down after the election, and when the weather turns winter. Until then, people remained pissed off and the weather is still good enough to go out at night and raise hell. Two inches of cold November rain in Portland will go a long ways to settling things down. That’s what happens in Vancouver. (BC)

      • MCH says:

        We can only hope. But I am not sure that this will burn out.

      • Lee says:

        “Protests will wind down after the election, and when the weather turns winter.”

        When I grew up in North Dakota we never had a homeless problem or for that matter a crime problem in winter.

        We had a saying: “-40 keeps out the riffraff”.

        What we did have was a crime rate that increased in spring through summer and then tailed off in fall.

        Then gradually North Dakota had increasing crime rates like the rest of the USA. Part of the problem was a result of drugs such as meth and the oil boom in the state that brought a lot of crap with it. The oil boom wound down.

        Unfortunately for the state it appears that the problems stayed……….

      • jon says:

        My friend bought a million dollar condo in San Diego downtown sometime back. Recently, I visited him one weekend night.
        It was a difficult scene with his posh building front street area littered with homeless people and there was dirt/filth every where.
        Hope he likes living there.

      • cb says:

        In many areas we can also attribute homelessness to high rents. I have trouble fully comprehending how something as basic as shelter should be so expensive to attain.The money supply creates inflation only if it is circulating in the economy. Part of it is our debt based, FED fueled economy.

        • cb says:

          That third sentence “The money supply creates inflation only if it is circulating in the economy.”, should not be in the above post.
          And I don’t project that sentence it as truth.

    • The MSM, like (???), does not want to create panic, or further more social unrest.

  22. Bet says:

    I have read that eventually the markets will trade against the fed. Guess we will find out one day.

  23. BuySome says:

    If Powell really wants to save something he should call Trump and tell him to get firefighting equipment into the coastal Western States now!! Maybe seize all that media, suspend their profiteering games, and use them to broadcast evactuation routes while there are any left. This is shaping up to be a doozie that’ll leave Covid in the dust (aka falling ash). Homes for sale, bring your own hoses.

    • 2banana says:

      Because there were never massive fires there before?

      Here is a hint.

      “Historian Stephen Pyne sees no coincidence in the fact that on Oct. 8, 1542 — 475 years to the day before the wildfires began ravaging Northern California — the Spanish explorer Juan Rodríguez Cabrillo saw smoke in the sky above Southern California.

      Cabrillo’s pilot, Bartolomé Ferrelo, dutifully recorded the phenomena in the ship’s log, as the explorer christened the San Pedro roadstead “Bahía de los Fumos o Fuegos.”

      –LA Times, 2017

      • Just Some Random Guy says:

        There were never fires before, no tornadoes, no hurricanes, no nothing. All this started when the SUV was invented.

    • EJ says:

      I hate to say it, but woods in the West are like the market: in debt and overextended.

      Many of those fires need to burn, otherwise they’ll just be worse next year.

      I guess Mr. Trump could invent a weather control satellite and park it over Cali? Or do a really good rain dance. Every year.

  24. Crush the Peasants! says:

    “…it has not spilled over to Main Street.”

    I question the hyperbole.

    Anyone with a 401k has benefited.

    Anyone who owns a home has benefited.

    This is Main Street.

    I wonder if Druckenmiller and his hosts are just talking their book, being on the wrong side of the market. Wouldn’t be a first for the fellow.

    • Wolf Richter says:

      Crush the Peasants!

      You don’t understand nada…

      The top 10% of Americans by wealth owned 87% of all stocks outstanding in the first quarter, according to data from the Federal Reserve.

      The bottom 50% own zero or near-zero stocks. Get real.

      • Wisdom Seeker says:

        We can’t talk intelligently about wealth inequality without looking at distributions by age group.

        The elder savers own the stocks and the houses. The young have little since they’ve had no time to save, and been forced into debt by inflated college costs. But there are also elder poor who never saved.

        Goosing the cost of college, housing, retirement investments and medical care – the 4 biggest expenses anyone will have – is a punishment to all except the elder retired savers. Deflationary pressures everywhere else because people have to save for those Big 4.

        Guess which demographic group owns Congress and the government?

        You want better policies, start electing younger people. Nancy Pelosi was born in 1940. Joe Biden in 1942. Trump in 1946. You think any of them genuinely cares about young people’s well being? They took care of their kids already.

        • MarMar says:

          There are plenty of senior citizens in poverty.

          Generations have some correlation with class, but looking at it this way obscures rather than illuminates, I think.

      • sunny129 says:

        +1

        The top 0.1% own more than the bottom 80%!
        Top 1% own nearly 50% and the top 10% nearly 90% and the bottom 90% less than 7% of wall st wealth.

        Many on the Main St don’t care if there is a mkt crash, hard for many to believe but this is barely appreciated.

      • Crush the Peasants! says:

        55% of Americans own stock. Over 60% own homes. Actions taken by the Fed to support stock prices benefit 55% of Americans. Actions taen by the Fed to support home prices benefit 55% of Americans.

        The Fed is not supporting stock prices or home prices only for the top 10% wealth percentile.

        • Wolf Richter says:

          Crush the Peasants!

          So if you have 2,000 in stocks, it doesn’t matter. It’s totally irrelevant. Even if you have $10,000 in stocks, it doesn’t matter. This is not wealth. It’s the value of a used car. If they have $35,000 in stocks, it’s the value of the average new car. It’s still not “wealth” today. The Fed is doing next to nothing for those people on the asset side, and it’s destroying the purchasing power of their labor through inflation. You really need get real.

          And driving up housing costs is nuts, economically, because it shifts spending from other things such as vacations and eating out and buying cars to paying property taxes, interest, insurance, broker fees, and just making principal payments. This is a zero-sum game, and high housing costs just shifts who is getting the money, from the real economy to Wall Street.

          Look, I get your point, my wife and I, we’re comfortable, she has a good job and I have my little company, and we can afford to live comfortably and happily in one of the most expensive places in the US, and we have assets, and we’re fine. So yes, we are among those that benefited from the Fed. But that doesn’t mean that I refuse to understand what kind of shit-show that Fed has put in motion, and what terrible direction it’s taking this country.

        • flashlight joe says:

          “The Fed is not supporting stock prices or home prices only for the top 10% wealth percentile.”

          Correct. The fed is supporting stock and home prices to save the banks that hold the debt.

      • Just Some Random Guy says:

        What about all the pensions that are invested in stocks? Union pensions, state employee pensions, utility employee pensions. That’s trillions of dollars combined. When stocks do well, those pensions are funded. And yet everyone conveniently forgets about them in the Main St vs Wall St food fights. Well, the pensioners live on Main St as do the future pensioners who will need stocks to do well in order to get that pension.

        And then about 35% of people have either and IRA or a 401k. I wonder where they live? Oh yeah, Main St.

        • Wolf Richter says:

          Just Some Random Guy,

          If these funds invested too heavily in stocks, well, they took a risk and they blew it. That’s why pension funds used to be heavily concentrated on bonds, and market value doesn’t matter because they’d hold them to maturity. Conservative pension fund investing. No Fed needed. Now it’s a scheme that needs the Fed’s money-printing and manipulations to stay afloat, and those few people who have a defined benefits pension fund depend on that Fed scheme or on a government bailout. Most pension plans are underfunded to begin with. And still, those people are the privileged. And if you have $20,000 in a 401k, the Fed’s asset bubble doesn’t matter. What you need is wage growth that beats inflation, which mostly it doesn’t for those people in the lower half.

          If you’re not in the lower half, you have no idea how tough it is there. And there is a certain self-righteousness about being in the top 10% or top 20%, and it’s F-you to all the others who are not there.

        • CRV says:

          So you don’t mind todays and future workers have to suffer for the pensioners ‘golden years’ (if they have any, most don’t have it golden)?
          I’m in my fifties now and i dont’want my kids to suffer or make sacrifices to maintain my wealth. I hope they will be willing and able to help their elders if needed, but suffering is not why i put them on this world.

        • YuShan says:

          Stock don’t become more “valuable” when their prices go up. You are just paying more for the same thing. Their value depends on the underlying profits of these companies.

          High stockmarket is bad for pension funds. Sure it looks nice on paper, but most funds are actually NET BUYERS and would therefore be better off with lower prices – they would buy more future profits for the same money.

          People have been overpaying for stocks for many years now, thanks to central bank policies. As a result, people have accumulated less value in their pensions than they would have otherwise.

          Even in the best case scenario that valuations remain this high forever, earnings yields are sh!t, so you need to save much more than you would need otherwise. And should valuations ever return to values more in line with historic averages, well then you are royally screwed.

          Many people are going to discover in the coming years that they have a massive shortage in pension savings, thanks to the Fed induced bubbles. They will have to cut back their expenses, which is dis-inflationary. This could also feed back into the actual profits of corporations, creating a self enforcing down spiral.

          As long as you are still a net investor/ saver, the Fed policies have been harming you, though many investors don’t realise they are getting screwed by being forced to overpay.

        • Happy1 says:

          Pensions have been forced into stocks by Fed market manipulation which devalued bonds and made safe return on conservative investment impossible. The ages is aiding and abetting the gamblers and punishing the prudent. Every person over the age of 60 ought to be on their doorstep with pitchforks.

        • RightNYer says:

          Yushan, exactly. Buying stocks at a P/E at 30-40 only works as an investment if those valuations are maintained forever. In other words, it’s a pyramid scheme that needs an ever larger “base” to maintain the status quoa.

          These days, no one even argues that earnings will grow to match valuations. It’s purely “Don’t fight the Fed!” or “There is no alternative!” That isn’t an investment strategy. It’s just a hope that you can always find a greater fool. At some point, you won’t be able to, and the whole house of cards crumbles.

        • Fat Chewer. says:

          The wisdom of a fool.

      • Frederick says:

        I was once in the top 10% yet never owned a single stock Lots of high end real estate though which inflated right along with everything else so I didn’t starve and managed to put my son through Georgetown Just never trusted the system enough I guess to play in their casino I just rented and sold summer homes to the Wall Street bankers

    • cb says:

      Well that’s part of the trick. You buy off enough beneficiaries of the larceny to have them look the other way.

    • historicus says:

      and anyone waiting to buy a house has been punished
      and anyone waiting to buy reasonably priced equities has been punished.
      This is a two way street.
      And the Market should be the determinant as to who benefits….not a committee.

      • Just Some Random Guy says:

        “and anyone waiting to buy a house has been punished”

        3% fixed mortgages are punishment? The things you learn some days.

        • Ed says:

          20% down payment.

          Are you not aware that 20% of $500,000 or $300,000 is a lot harder to accumulate than 20% of $250,000 or $150,000?

          Yes, this is NOT a problem for the upper middle class.

        • RightNYer says:

          Are you trolling? Everything you’ve posted in this thread can be summed up as “screw everyone else, I’ve got mine.”

          Here’s a hint: the 3% interest rates just increase the sale price, so it’s benefits go to CURRENT homeowners, not young people starting out.

        • Happy1 says:

          3% mortgage on a 2 million dollar home in SF in 2020 is better than 8% mortgage on the same home in 1992 for 400K? You need math help.

        • VintageVNvet says:

          Not sure if you are ”cherry picking” deliberately or not jr?
          Consider the house we purchased for $84K in 2015 now appraised at $215!
          And don’t think the average wages have gone up anywhere near that much, do you?
          C’mon dude, get at least some where close to reality/realty!

          Workers of the World UNITE,,, and throw off that tent you’ve been living in,,,

        • FleaBite says:

          It doesn’t sound like you learned that concept quite yet. Maybe you should start the process of learning that simple truth by thinking about what it is that most people are actually buying when they “buy” a house? Most regular people don’t pay cash for houses so what are they really buying? They don’t buy houses, they buy house payments. 3% of $600k is $1500 per month in interest just the same as 6% of $300k is. I would much rather have a 6% rate on $300k than 3% on $600k because I would pay it off much quicker. How much quicker? About $300k of confetti funny money quicker. And when I pay it off quicker, maybe I start spending a little more of that confetti on other things with my newly liberated cash flow, and maybe the Fed gets its higher inflation they so much desire. But since 3% rates are so great, I don’t do those things and am forced to save more for longer instead. After all, who wants to be a debt slave? Wonder how that helps the Fed achieve their goal of higher inflation. Some people just never think for themselves and only parrot what they are told – 3% rates are good or some such nonsense.

    • MCH says:

      Well, people with assets have benefited, but as Wolf rightly points out, the benefits are disproportionately skewed due to the fact that a few people including Bezos, Gates, Buffet, Zuck, the Google twins, fat Benioff, etc have held a disproportionate amount of wealth.

      BTW, for the names mentioned above, I actually admire everyone of them, because they made it largely on their own.

      You can’t deny those facts.

      • polecat says:

        How can you admire those who are … through their actions, making life hell for everyone else!

  25. Macro Investor says:

    What is the argument here? I don’t get the point of all this. Should the fed be closed down, and force the US go full on austerity?

    What would happen to the 100 million on various forms of welfare? What would happen to the 10s of millions of business owners just forcibly closed by gov’t edict? Half the economy has been shipped off to low wage countries. Maybe making a few dozen billionaires is the cost of protecting the most vulnerable. I’m not jealous and angry about his because I see the big picture.

    • RightNYer says:

      Because making billionaires with printed money DOESN’T do anything to protect business owners or the people on welfare.

      Not at all.

    • van_down_by_river says:

      The Fed should be closed down. It is a cowardly, clueless and parasitic organization.

      The US economy is in dire need of austerity and a reset. The forest is being chocked by years of dead underbrush, creative destruction must be allowed to work.

      Austerity was imposed on the US in 1980 and this allowed the economy to flourish in the decades that followed. I’m sorry but there is no free lunch. Your lunch bill is overdue, best pay your tab and stop gorging at the buffet.

      • khowdung Fllunghi says:

        “Your lunch bill is overdue”

        Just wait ’til the bill for 20 years of overseas wars start to arrive!

        • Frederick says:

          I think it’s already arrived frankly Americans are not well liked for the most part in my area of the world and even though it’s the govt not the little guy responsible we still carry part of the blame in people’s eyes

  26. No Expert says:

    Perfect illustration of what a laughing stock mainstream economics is.

    ZIRP + QE (the biggest of guns) failed to achieve desired inflation, now we’re worried about too much inflation and also at the same time deflation, oh and we created a massive speculative bubble, worsened wealth inequality and failed to stimulate economic growth.

    • Old School says:

      The central banks have went all in to reflate a debt ridden world economy. Its either going to work and the economy will slowly crawl out of the hole or there is going to have to be a relatively quick reset.

    • cb says:

      No Expert: “ZIRP + QE (the biggest of guns) failed to achieve desired inflation,”
      _________________________________________

      Do you desire the inflation?
      Who desires the inflation?
      Why?
      What does it accomplish, and for who?

      (false premise any way, inflation has been huge (assets, real estate, rents, tuition. education, health care, etc. CPI propaganda should be avoided)

  27. historicus says:

    Remarkable that the promotion of inflation meets with no blow back.
    2% rips 28% off the dollar in ten years. 2.5% rips 28% off the dollar in ten years. And the policy of the Federal Reserve is that this ISNT ENOUGH!
    Where are all the minimum wage proponents? This should be a sharp topic for all who care of the American worker, and the value of wages.
    Not a peep.

    • YuShan says:

      I’m always baffled by the fact that liberal economists like Paul Krugman etc are the biggest cheerleaders for inflationary policies. Inflation is really the main mechanism that has kept the bottom (and even middle class) down.

      Wages at the bottom have proven to be sticky. So should they not be actively cheerleading for DEflation then? That would gradually raise people out of poverty. It would increase the wages-component of the GDP at the expense of profits.

      • doug says:

        PK not a liberal. poses as one when useful…

        • Russell says:

          Krugman is liberal to the bone. Everything he says or does has underlying motivation. Lies, damn lies and statistics!!!

        • Wisdom Seeker says:

          Krugman’s a lefty propagandist but he’s definitely not a liberal in the classic sense of the word.

          Trouble with the propagandists is that (on both sides) they’ve destroyed the language while demonizing their well-intentioned but misguided opponents.

          They’ve so badly distorted the meanings of basic descriptive adjectives, such as “liberal” and “conservative”, that it’s impossible to even have a political conversation. People don’t realize that they’re using the same words to mean different things, and everything is a mess…

          But of course, first rule is to control the framing of the questions, right? So “truth isn’t the first casualty of war”, after all. It’s common-sense agreement on language.

    • Happy1 says:

      Yes, price stability should mean NO inflation.

      • cb says:

        Shouldn’t price stability mean prices staying the same, not rising or falling?
        And shouldn’t No inflation mean no increase in the amount of money in existence?

  28. van_down_by_river says:

    … well what Jesus plainly fails to appreciate is it’s the meek who are the problem. – Jerusalem inteligencia from Life of Bryan

    The worlds wealth commanders borrowed vast sums of money to buy everything and charge everyone rent and collect dividends and they would very much appreciate some extraordinary inflation to help pay off their debts, so expect the beatings to continue until the morale improves (prepare for infinite monetary beatings)

  29. The fed isn’t all-powerful. Lowering interest rates may have an effect on the economy but QE is an asset swap. Cash for bonds. In an economy this weak low interest doesn’t mean much.
    The bottom 70% have been dealt out of the economy for over 20 years and no longer have the financial prowess to drive aggregate demand to the point of supply; so no “good” inflation. That cannot be fixed with a zero-sum asset swap.
    Either repair the wealth and income of ordinary people or run large federal deficits forever- or at least until markets reject US debt.
    That’s it. All you really need to know about the economy and markets at this point. (OK a bit oversimplified but close enough).

  30. Hernando says:

    So, if I hold 100,000 dollars cash now, what will its value be in December 2020? How about December 2021?

    That is what makes me sick- I don’t know the value of the money that I have now or in the future. I don’t want to buy any assets now. But I do eventually. Will I be able to afford the assets I want to buy a year and a half from now? I don’t know.

    • There may not be a stimulus deal before the Senate leaves town in a few weeks, and if one is struck, it had better be designed to stimulate consumer demand. If not, and the Republicans lose in November, expect a “scorched earth” policy from Mitch- no stimulus until about February.
      Can you say Melt Down? Patience. FOMO kills.

      • Hernando says:

        I’m not buying anything. But I still do not know the value of my cash on hand. But that is good to think about.

        • If you’re concerned about inflation, don’t be. That is a very long way off.

        • Weary Patience says:

          The forbearance and bailouts and mega unemployment enhancement and stimulus really stymied savers’ ability to snag a small win after a couple decades of losses – just have to wait even longer until assets start to deflate. On the flip, blowing most all of the spare powder (cut rates, QE, direct stimulus payments) means the eventual correction may run deeper than it would have without intervention, and patience may pay better.

        • Happy1 says:

          @Schofield,

          Are you nuts? Do you own a home? Pay for college? Health insurance? Buy food? Sheesh.

    • Memento mori says:

      It will be less no matter what, rest assured.

    • Frederick says:

      Hernando Nobody knows that’s the problem All you can do is hedge I suppose I’m Leary of going all in as well so I’m holding a substantial amount of cash It’s painful sometimes

    • NotSoros says:

      USD is not money, it’s fiat currency. It’s value is the government’s con game. Lack of economic literacy has perverted the meaning of language. Money is an independent store of value that stands on its own, no need for a counterparty like the government to prop it up. Gold is Money.
      Historically, fiat always has and always will go to zero. So that’s your final answer: zero.

  31. breamrod says:

    you know the bond market may just upset their apple cart. If long rates rise then they’ll be forced by the market to raise short term rates or else inflation starts to rise and then long rates rise more etc, etc. seems like they are in a catch 22 situation. Looks like Powell is the fall guy. Not near the swooning over him now like Greenspan and Bernanky.

  32. hidflect says:

    The sentiment seems to be catching. Even Crazy Ted is getting in on the bandwagon.

    SEN. CRUZ DOESN’T EXPECT CONGRESS TO PASS ANOTHER STIMULUS

    • People are way too focused on the fed. Deficits are more important…if there is no new stimulus then look out.

    • Petunia says:

      I don’t expect any stimulus bill to pass either. Congress just doesn’t care about the people anymore. They screw us and we still line up to keep them in office. I’m voting for the prez, but the rest, not so much.

      • Fat Chewer. says:

        Hi Pet. I didn’t realise you were one of the downtrodden blue-collar Trump supporters. You come across as an educated lady of the world. Cos what’s funny is that as a blue-collar worker myself, I could never support a billionaire to represent my interests. Common sense tells me that his interests are very different to mine and that a billionaire would not even truly understand my interests. Just sayin’.

        • Petunia says:

          I grew up in NYC with a good view of the president’s career. He employed thousands of blue collar workers in construction and in the hotel/gaming business. All mostly union guys making good money.

          I don’t know where you get your information but he even made money for NBC, so supported those union jobs as well. His personal life was also a big money maker for the newspapers, all union guys too. Just sayin’.

  33. Old Pauper says:

    How did we ever get involved with this stinking outfit in the first place?
    It’s taking us down the drain.

  34. Putter says:

    Inflation is a regressive tax. It will grind down the poor and middle class into homelessness and soup lines. The fed is a totally immoral institution. It will eventually tear this country apart. Riots are just the beginning.

    • Frederick says:

      I totally agree it doesn’t look good from afar
      I’m almost afraid to come home for a visit between the violence and the beer virus thingy

    • historicus says:

      Putter
      Those who champion minimum wage increases dont even seem to know that demanding the Fed stick to its “stable prices mandate” is just as important. That promoting inflation is the OPPOSITE of pushing for higher wages for workers. Pushing for inflation reduces real wages, the Fed does just this and no one seems to care. Inflation pounds down and crushes the average American. Remarkable.

  35. Jack Murphy says:

    The reasons they apologize for 2% inflation is that wealth in the United States is so stratified between the 1% and everyone else that, in order to keep cash on the streets, they need to print new money….

    • The Colorado Kid says:

      For Christs Sakes suit with the ‘money printing’. The FED can’t just print money. They can create Bank Reserves is all. At least for now. Once they can monetize their liabilities, then you will have your ‘money printing’.

      • cb says:

        Are bank reserves not denominated in dollars?
        What are the current bank reserve requirements?
        Can bank reserves not be introduced into Wall Street or Main Street?
        Can bank reserves not provide loans and introduce new dollars into the system even beyond those reserves?

  36. Robert says:

    I think you’re over-focusing Wolf. Can’t say I read much into the recent Fed-Inequality commentary.

    And I doubt the Fed cares about the media. The Fed will keep pumping because it will not allow the system to die. The Fed’s actions are an autonomic spasm, a fight or flight response, they are not well thought out economics (which would include concepts such as fair wealth distribution). Just so happens such a response also keeps the power elites in power. The Fed has two broad choices – 1) try to stimulate inflation by printing or 2) allow the economy to fall into a deflationary spiral by not printing enough.

    The fundamental problem is that the people who need 0% interest rates and stimulus are not getting it. But I assume at some tipping point they will eventually find the money to buy guns, and attempt to bring balance to the system.

    Now I thought it was our elected officials responsibility to deal with this economic tragedy? Of course that is not happening. Both parties are a complete joke.

  37. No Expert says:

    Cant help but wonder if the Feds actions are the cause or the result of a broader problem. Profitability on capital has been trending down since the golden age of capitalism in the 1960’s, ‘globalisation’ in the 90’s gave it a shot in the arm for a while, then back to the downward trend. Inability to get a return on capital – low investment in productive sector of economy – flight into financial products (speculation) – low investment means stagnant productivity leading to low inflation – cue QE (steriods for the speculation on finanical products already underway), roughly in that order. I.e. the tendency for the rate of profit to fall manifesting.

  38. Island teal says:

    Dozens of reasons outlined above that make the case to hold as much physical Au and Ag that you can afford. You should be extremely happy going forward with that decision. 😀😀

  39. Tbv3 says:

    I predict a debt jubilee — partial or total cancellation of debts — simply because I think the debts will become unserviceable & unrepayable even at near-zero interest rates and extended maturities.

    The WSJ reports “Biden Plans to Cancel a Big Portion of Student Loan Debt.”

    Wolf, if debts — business, government, individual — are cancelled or reduced by 50%, would that increase inflation akin to FDR’s revaluation of gold in 1933 or Nixon’s in 1971 or would it create massive deflation?

    • Wisdom Seeker says:

      Cancellation of debt would be a great-depression level deflation trigger.

      No one will lend if credit contracts can be abrogated by political fiat.

      Note that campaign-season political promises aren’t worth much. I’ve been waiting over 12 years for “hope and change”, being able to keep my doctor and not pay outrageous insurance bills, the winding down of dozens of pointless wars, and the criminal punishment of all the fraudsters of the 2005-2008 period. Oh well.

  40. Social Nationalist says:

    MMT??? The Fed lends, it does not spend. The U.S. simply abuses it’s credit card, because nobody stops them. Most of it is on transfers.

    Capitalism died in 1914. It never worked without huge scientific advancement.

    • Frederick says:

      I’m old but on the top of my bucket list is to be able to live long enough to see these creatures suffer for what they have done to our world. Is that too much to ask?

    • Fat Chewer. says:

      So people stopped accumulating capital to invest in 1914? That is news to me! Can you explain what system we are in today? What was all that thing about so called “capitalism” vs communism about? I’m off to sue my primary school for teaching me that I live in a capitalist society.

  41. polistra says:

    Well, this isn’t mysterious. In 2008 when the Fed started ZIRP and QE, Bernanke stated openly and clearly that the sole purpose was to jack up share prices. Ever since then, the media and commentators on all sides have ignored what he SAID, and argued whether the Fed is “clueless” or “failed”.

  42. Michael Engel says:

    1) The Fed is a bank in which US Treasury General Account reside.
    2) The Fed is a bank that finance our “National Interests” since 1914.
    3) Jeremia Powell took office in Feb 2018 for 4 years.
    4) His prophet of inflation expectations to save the world from NR
    didn’t materialized.
    5) After several stopping actions by market makers, when the DOW plunged was shortening it’s thrust, in accumulation phase, the Fed stimulate the pockets of the large investors and saved their portfolio.
    6) Since Jan 2018 the DOW became a system control with a positive feedback loop going crazy.
    7) Every swing is wider and wilder than the previous one, with sharp edges.
    8) A system like that is bound to break.
    9) The Fed cannot stimulate our system if our leaders will not concede
    defeat.
    10 ) Jeremia Powell will become their next Fed Fall Guy.

    • Rosebud says:

      3) … Powell took office in Feb 2018 for 4 years.

      (Small edit)

      3) … Powell took office (on 5) Feb 2018 for 4 years.

      Fractally, this date rolled over (to 6) last week in sympathy to the market correction…

      … a further signal that Something Big is Coming.

  43. Nate says:

    Strikes me one of the reasons they haven’t been throwing out helicopter money to the masses is that would create inflation. They wanted to blow some asset bubbles first so that’s where the money went.

    Next up, MMT to create inflation – lots of money chasing fewer goods? It’ll end up in the pockets of the plutocrats eventually too.

  44. Rosebud says:

    “De facto MMT, which is what we are doing right now, because we actually have the Chairman of the Federal Reserve – with a three-and-half-trillion-dollar deficit – out lobbying Congress to do more spending, and guaranteeing to those of us on Wall Street that he’ll underwrite it.”

    Monetize the Art Banana, $ 3.5 Trillion is about right. Move it to $4 T at election and $5 T at Winter Solstice.

  45. John says:

    Wolf,
    Right on! They have taken over. Since the financial crisis.

  46. Lisa_Hooker says:

    The last Chairman to actually accomplish something positive was Volker. That’s a long time ago. A lot of politics, not economics, have past under the bridge since then.

  47. Wes says:

    Good analysis Mr. Richter. Yes, the Federal Reserve via the US Treasury, the banks and Wall Street are first in line concerning the conduit of money. The PPP is a prime example where the banks received 5% for the loan originations right off the top.

    • Wes says:

      PS, they didn’t need to apply for PPP since they received it first so as to administer it.

  48. RedRaider says:

    What’s going to replace the dollar?

    That’s easy… barter exchange! The political class seems to think electronic money. But I think when all money is under political control it means the population doesn’t have any money and are forced back into barter exchange system. That’s when political class learns electronic money means NO money.

  49. Winston says:

    “It sounded like an apology because inflation has been 1.6% instead of 2% the last 10 years. Well, their mandate is price stability, where I think 1.6% is. They hit a home run.”

    “I think it’s dangerous. I think we could easily see 5% to 10% inflation in the next four or five years.”

    We already are…

    ANY conversation using official inflation figures is a FARCE since that figure is the end result of important, life sustaining items not being included in the mix, items improperly weighted in the calculation, ridiculous hedonics, substitutions, etc., etc. all done to reduce COLA payments as was admitted by a member of the Boskin Commission which introduced the hedonics/substitution scam. AND THEN, as pointed out in the excellent book Greenspan’s Bubbles, the Fed uses this manipulated garbage data to make decisions.

    • RightNYer says:

      Right. The things we NEED are either undercounted or not counted at all, and extraneous luxuries are overcounted. Food, housing, education, and health care is skyrocketing, but hey, at least we can get cheap gas for travel we’re not doing and cheap Chinese made crap from Amazon!

  50. David Hall says:

    In the late 90’s they argued the growth in stock prices was driven by productivity increases. They ignored the sky high valuations. It tumbled down in 2000 and again on 9-11-2001.

    The Fed can not fix a bad credit rating. The Fed can not cover for someone who lies on a loan application; that is bank fraud.

  51. Wes says:

    Mr, Richter, FYI concerning FRBNY President Mr. Dudley-when the 2008 financial crisis hit Dan Tarullo was at the helm working behind the scenes with Dudley being just a figurehead. This information wasn’t released until years later.

  52. Sam says:

    “Reality is merely an illusion, albeit a very persistent one.”
    — Albert Einstein

  53. Old School says:

    I was born in 1956. Looking back on it now it is hard to believe ‘silver’ dimes, quarters and half dollars we’re common pocket money when I was a kid. Wasn’t that long ago really. My parents had a 20 year mortgage at 6%. The house payment was $44 for a small 800 sq ft ranch.

  54. sierra7 says:

    Our system is functioning (or not) just as designed by the oligarchy.
    Historical momentum has brought us to this point of ?????
    “Free-Market” capitalism, with no restraint (regulation/rules of the game) can only end with complete destruction of the society practicing.
    Any other game in town?
    We aren’t smart enough yet to conjure anything “better”.
    Remember Margaret Thatcher’s famous comment: “There is no other choice”. As hateful as she was she is/was correct……until we undergo a new dark age of society and hopefully another “renaissance” emerges.
    Hard headed greed prevails in the system we embrace.
    Too much common societal “narcissism” is practiced by the commons.
    A corrupt political/economic/justice system prevails.
    There is no “remedy” from the FED, the FED government or other bought and paid for politicians that we “elect” to office.
    The system has to be overthrown.
    Why do you think so many people are protesting in the streets?
    The game is afoot.

    • No Expert says:

      Its not that we’re not smart enough yet, its a problem of power, they have it and we don’t, currently.

  55. tommy runner says:

    thanks for the link, hi joe! i have connectivity issues w/the peafowl, maybe its the cable co. i have to go elsewhere to hear adults discuss wait times in drive thrus and saw pop cans in half w/ a table knife. props to the on air folks, but i miss mark. like most, the problem is on the other side of the camera, prompting humanity to please pull forward and pay at the second window.

  56. Sound of the Suburbs says:

    It’s not the FED’s fault, it’s the economics.

    The economics of globalisation has always had an Achilles’ heel.
    In the US; the 1920s roared with debt based consumption and speculation until it all tipped over into the debt deflation of the Great Depression. No one realised the problems that were building up in the economy as they used an economics that doesn’t look at debt, neoclassical economics.
    Not considering private debt is the Achilles’ heel of neoclassical economics.

    The FED does the best it can with an economics that doesn’t consider debt, which really isn’t very good at all.
    Greenspan and Bernanke can’t see the problems building before 2008.
    https://www.youtube.com/watch?v=vAStZJCKmbU&list=PLmtuEaMvhDZZQLxg24CAiFgZYldtoCR-R&index=6
    At 18 mins.
    (When you use neoclassical economics that doesn’t consider debt, the economy runs on debt and then crashes in a Minsky Moment, 1929 and 2008.)
    No one can work out what caused 2008, and afterwards and they attribute it to a “black swan”.

    Janet Yellen is not going to be looking at that debt overhang after 2008 and so she can’t work out why inflation isn’t coming back.
    It’s called a balance sheet recession Janet, you know, like Japan since 1991.

    Jerome Powell is not looking at the debt overhang after 2008 and so thinks the US economy is fixed and raises interest rates.
    Raising interest rates with all that debt in the economy will soon cause a downturn and there is no way he will get anywhere near normalising rates.
    He soon has to backtrack and reduce rates again.

    The FED never stood a chance.

  57. Optimist_Tim says:

    Some people missed out on the latest stock boom, or the Bitcoin boom, or the 1980s gold boom.

    I’ve been poor enough to live off a bag of potatoes and a tub of butter for a month, and have met and worked with many poor people. Most of the poor people I met spent too much and saved too little, including me.

    The problem is not that poor people don’t own equities or Bitcoin or the investment flavor of the month. The FED cannot make them do that. Maybe jealousy of their friends using RobinHood can, like the BMW next door. The problem is they do not have Habits that accumulate assets and then reasonably allocate those assets to solid companies.

    This is an education and personal discipline situation, which can be improved for poor people, who have the most to gain. Get away from the Consumer mentality and become Investors or think like Business Owners. Shares let you own a business run by experts, but you have to carefully select businesses to trust with your money, not gamble. If you can pick a good spouse, you can buy shares in good businesses that will mostly work out.

    If someone can save $10000, they can build up a portfolio over time. In 1990, my friends and I saw Berkshire Hathaway around $5000 a share and wanted to buy but did not. Now where is it? My error was not a lack of income at $10 an hour, it was not being frugal enough to keep assets aside to take advantage of 1 in 10 year opportunities. It is easy to blow money and have fun but saving and investing takes work that really pays off, but people can’t imagine that when it’s out of sight over the horizon.

    • Lisa_Hooker says:

      There was a time when a passbook savings account yielded 5% and you could see a bit of money accumulate. Now folks look at their bank statement interest and figure there’s no point to saving. Now, for them, there isn’t.

      • 91B20 1stCav (AUS) says:

        Lisa-draw a straight line back to the stagflation of the late ’70-s/early 80’s when average folks saw their savings decimated, even at 5-6%, and jumped on buying things (‘assets’?) with less depreciation, instead (remember ‘WIN’ buttons?). Two generations on, i see many who were raised in families where no savings and living beyond ones means (often discharged in bankruptcy) on revolving credit was/is the norm-savings? A sucker bet in their worldview-it just doesn’t pay in light of a future high-inflation events (things-NOW).

        (Wolf-sidebar, here. I always had the impression that the high inflation of the late ’70’s was triggered by the banks attempting to lower the net value of the morass generated by their massively imprudent lending defaults to various South American nations (Brazil, in particular, as i recall), and the tail of national spending connected to our long sojourn in Southeast Asia-all on the backs of the taxpayer’s $value, of course. Any thoughts? I know you won’t hesitate to turn the cold water hose on me!).

        Stay well, stay safe, and-
        may we all find a better day…

  58. Basle BASLE says:

    Wall Street is blaming the Fed for saving it in March! Doesn’t make sense, does it? Former New York Fed President, William Dudley, blames Jerome Powell for creating a “moral hazard”, but this “hazard” is endemic to the functioning of Wall Street! As for fund-manager Stanley Druckenmiller, while he is happy about the March rescue – who wouldn’t be on Wall Street – he blames the Fed for raising the likelihood of higher inflation and deflation. But, he can’t have his cake and eat it too!

  59. Earl says:

    Druckenmiller, your as full of crap as the rest of them. Shut up. The Fed been juicing for years and you and your hedge fund buddies made killings in the early deregulation/ modernization acts and easy to none regulation in the golden days of hedge funding! Yes those easy days are done now aren’t they. Leveraged Buyout (LBO) gangs, private equity and the wall street banks have pretty much picked the bones clean of our US companies. Well, as you guys claimed in the 70’s to much fat, well, hell that’s all gone now. Now your all done to bone lol ha
    And Druckenmiller, your such a turncoat. The fed pumped money to you guys for years when you guys had this figured out way before everyone else. But, hey being born at the right place at the right time with fancy elitist degrees sure was convenient too. Now that everyone has figured out what you guys did years ago your saying this is bad, were in a bubble, it’s mania time. This all started in the 70’s when we listened to Friedman and his trolls he had at work pushing the “only thing that matters is profits” theory and other such nonsense. Common on Druck, GOAT, be more thankful to the Fed and your bankster buddies, they made you guys a ton of easy money over the years.

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