Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

We Are in for Decades of Ultra-Loose Monetary Policy

Interest-Rates / Quantitative Easing Jul 23, 2019 - 04:41 PM GMT

By: Jared_Dillian

Interest-Rates

President Trump recently nominated Judy Shelton to the Federal Reserve Board of Governors. She is the United States director for the European Bank for Reconstruction and Development, which I had never heard of until her nomination.

Shelton is a Republican and believes in the adoption of a gold standard. She currently believes in lowering interest rates, after spending the Obama years criticizing the Fed for lowering interest rates.

You may wonder how a person can be in favor of a gold standard and also for lowering interest rates at the same time.

I am wondering that, too.


I think some folks had fun with Dr. Shelton’s Wikipedia page, because it says: “Before Trump became president, she was a longtime advocate for free trade, but after he became president, she supported his administration's trade war with China.”

We seem to have a case of someone being ideologically inconsistent in order to secure professional advancement. The slang for this is “selling out.”

Or, maybe she had an ideological transformation—maybe she really does believe in zero interest rate policy (ZIRP) and negative interest rate policy (NIRP) and a gold standard all at the same time.

But that would be impossible.

The confirmation hearings are going to be interesting.

Of Course

Of course, failed Fed nominees Stephen Moore and Herman Cain also believed in hard money and soft money simultaneously. Where do these people come from? They didn’t exist a few years ago.

Go back to the days of Thomas Hoenig. He was another champion of gold, but also a big-time interest rate hawk on the FOMC, back in 2010. Now that is someone who believes in hard money.

Real interest rates are zero and Trump thinks they are too high. I have been saying in The Daily Dirtnap for some time that Trump thinks Fed funds should be zero or negative, and he won’t stop criticizing the Fed until he gets what he wants.

He might have to replace the Fed chairman in the process. Judy Shelton and Christopher Waller (decidedly a soft money advocate) are both chairman material. My guess is that it would be Richard Clarida who has the resume for it and also has been very malleable to Trumponomics. This goes back to what I wrote about two weeks ago: Trump is an unstoppable force that is going to change the face of macroeconomics for decades.

I don’t believe in soft money. I believe in metallic monetary standards and persistently high interest rates. I really am curious as to the psychology of Judy Shelton, Cain, and the rest of them. Did they really change their minds? Or are they really that cynical?

I suspect it is the latter.

Inflation

In Trump’s defense, it hasn’t really made any sense to be vigilant about inflation. We had rates at zero for the better part of a decade, and we didn’t get inflation.

Unless of course, you’ve tried to buy a house in San Francisco. Or a stock market index fund. Or a college education. Low interest rates have inflicted just as much economic misery as high fuel and energy prices did at one point in our history.

It is accepted wisdom that Federal Reserve policies have actually exacerbated inequality by ballooning the prices of financial assets.



Yet the Fed actually believes the opposite—that low interest rates solve the inequality problem. At least, Kashkari does. He’s another ZIRP NIRP Republican.

We used to worry about dovish Democrats taking over the Fed and cutting interest rates and bringing back the inflation of the ‘70s. Now the Republicans are doing it! A Democratic administration would behave no differently. Sobering thought—we are in for decades of ultra-loose monetary policy.

What do you think is going to happen next?

How would you position your portfolio?

I know there are plenty of stock market bears reading this newsletter. Think of what unlimited monetary stimulus is going to do to your short positions. It is going to hurt like an Alvin and the Chipmunks Christmas CD.

I’m not optimistic on stocks—it’s just the reality of the situation. Unlimited. Monetary. Stimulus. Forever. Those houses in San Francisco are probably not going to get any cheaper.

Who Matters More

One thing I tell people all the time, especially people who are upset about Trump, is that Trump really hasn’t had that big of an effect on your daily lives.

Your job is the same, your family is the same, you drive into work in the same car and drink the same coffee.

It was the same when Obama was president, and it was the same when Bush was president. Nothing really changes.

Who’s on the Fed matters a lot more than who’s in the White House. That can affect your daily life, from the cost of gas you use to drive into work every day, to the cost of the coffee you drink, to the return on your investments, to the value of your real estate.

What the Fed does has the potential to start revolutions—and this particular Fed just may do that.

People should spend less time thinking about whether the US women’s team is invited to the White House and more time thinking about why Judy Shelton is a ZIRP NIRP gold bug.

Get Contrarian Investment Ideas from a Wall Street Veteran

Jared Dillian writes The 10th Mana free weekly newsletter for contrarian investorsEvery Thursday, he delivers a torpedo of incisive commentary that crushes consensus thinking and exposes the true workings of “Mr. Market.”  Subscribe now!

By Jared Dillian

© 2019 Copyright Jared Dillian - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in