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Market Oracle FREE Newsletter

Category: US Federal Reserve Bank

The analysis published under this category are as follows.

Politics

Thursday, August 15, 2019

US Government Is Beholden To The Fed; And Vice-Versa / Politics / US Federal Reserve Bank

By: Kelsey_Williams

We hear quite a bit today about the issue of Federal Reserve independence. The crux of the argument usually centers  on monetary policy executed by the Fed versus opinions of politicians and others who want and expect something different, which they believe will provide more favorable results.

President Trump has been ardently vocal in demanding that the Fed be more aggressive in cutting interest rates.  He also wants, and is encouraging, action that would result in a weaker US dollar. He believes that it would be good for American businesses. His reasoning is that a weaker US dollar would make American-made goods more competitive.

Whether or not the President is correct doesn’t matter for purposes of this article. What is important is that there is a wide difference of opinion between the Federal Reserve and its current policies (re: Jerome Powell) as compared to the wishes of the United States government (re: President Trump).

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Politics

Sunday, July 14, 2019

Art Laffer On The Fed, What Would Milton Friedman Say? / Politics / US Federal Reserve Bank

By: Steve_H_Hanke

Art Laffer, the supply-side guru and recent recipient of the Presidential Medal of Freedom has caused yet another stir among the chattering classes. Last week, he told John Catsimatidis on AM 970 New York that “The Fed shouldn’t be independent of the administration. Never should be. None of those people were elected. They were appointed.” He repeated those sentiments on CNBC’s “Squawk Box” this morning.

What would my good friend Milton Friedman say? Well, unfortunately, we don’t know for certain because Milton is no longer with us. That said, Nobelist Friedman weighed in on the issue of central bank independence on several occasions. Indeed, an essay he penned in 1962 was titled “Should there be an Independent Monetary Authority?” His essay appeared in In Search of a Monetary Constitution, which was published by Harvard University Press and was edited by my collaborator, the late Leland B. Yeager. Friedman was unambiguous. He concluded that “The case against a fully independent central bank is strong indeed.”

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Interest-Rates

Friday, July 12, 2019

The Hidden Reason Why Fed and "Systemically Important" Banks Oppose a Gold Standard / Interest-Rates / US Federal Reserve Bank

By: MoneyMetals

Chairman Powell’s testimony this week was closely scrutinized not just for its economic implications but also for its political overtones. Powell cited “trade tensions” as cause for concern about the strength of the global economy. He clearly seemed to be blaming President Trump’s tariffs.

But if the tariffs are what ultimately move the Fed to cut rates, Trump will have finally gotten what he wants out of Powell. In recent weeks, Trump has stepped up his attacks on the central bank, calling it the biggest problem facing the economy, floating the idea of firing Powell, and suggesting his administration would match China’s and Europe’s "currency manipulation game."

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Interest-Rates

Tuesday, June 25, 2019

Testing the Fed’s Narrative with the Fed’s Data: QT Edition / Interest-Rates / US Federal Reserve Bank

By: F_F_Wiley

“The fact that financial markets responded in very similar ways … lends credence to the view that these actions had the expected effects on markets and are thereby providing significant support to job creation and the economy.” —Ben Bernanke defends the idea that markets and the economy respond significantly to quantitative easing

“… it will be like watching paint dry, that this will just be something that runs quietly in the background.” —Janet Yellen refutes the idea that markets and the economy respond significantly to quantitative tightening

It doesn’t take much calculation to see that the Fed’s position on quantitative tightening (QT) is blatantly inconsistent with its position on quantitative easing (QE). You only need to notice that the excerpts above, taken together, violate the following pair of postulates:

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Interest-Rates

Sunday, June 02, 2019

Gold Standard, Federal Reserve, Economic Law / Interest-Rates / US Federal Reserve Bank

By: Kelsey_Williams

In a recent opinion by Sebastian Mallaby, published in the Washington Post, the author and columnist says the following:

Money is an abstraction, a political confection, a set of castles built on air. No wonder it makes people feel queasy. Gold is tangible, immutable, somehow reliable and real; there will always be people who believe in it. But the truth is that modern central banking is one of those elite inventions that generally works. The gold standard has given way to the PhD standard, and we are all the better for it.”

In his article, Mr Mallaby presents his arguments as to the reason and logic that a gold standard will not work and that it is an idea which is out of date and inferior to the current system, i.e., “modern central banking”.

The opinions are a response to statements made by Judy Shelton,  currently under consideration for appointment as one of the seven governors on the Federal Reserve Board.

Mr. Mallaby refers to former President Reagan’s “nostalgia” abut the gold standard as being “curious” and says that “survival of this sentiment in 2019 is even more baffling”.

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Interest-Rates

Saturday, June 01, 2019

Finding Record Investor Profits Hidden In The Fed Minutes / Interest-Rates / US Federal Reserve Bank

By: Dan_Amerman

Sifting through the minutes of the Federal Open Market Committee (FOMC) to look for signals of changes in policy is a fixation for the financial media and the investment industry. Because both the stock and bond markets can reverse directions based upon the Fed's intentions for the direction of Fed Funds rates, there is an intense focus on finding signals for those intentions and whether the signals are changing.

However, like generals preparing for the last war - there is a strong case to be made that most analysis of the FOMC minutes is focusing on the details, while missing the big picture for the next recession (which could be growing more imminent).

As explored herein, the Fed itself is as much focused on how to change the "SOMA" to enable the strongest form of "MEP" in the event of another recession, as it is on Fed Funds rates.

When we get past the jargon, what the Fed is debating in plain sight are the specifics for how to give as much money as possible to some investors in the event of another recession, in the shortest time possible.

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Interest-Rates

Tuesday, May 07, 2019

US Federal Reserve Bank Vetoes Cain and Moore / Interest-Rates / US Federal Reserve Bank

By: BATR

If you ever had doubts just who is squarely in charge of the finances for the debt created U.S. Dollar currency, the nixing of Herman Cain and Stephen Moore for the Federal Reserve Board confirms that the Banksters are the real power. The Shadow Government is truly the elitists behind monetary hegemony that rules over government and economic policies. The institutions that shape and direct the financial dynasty of the reserve currency is outside the realm of Presidential compliance. Donald Trump has just experienced the push back from the Jackals of Jekyll Island.    

Clearly the Federal Reserve 100 Years of Failure has been the single most destructive financial factor in history. Over the last century the Merchantry economy has been systematically dismantled in favor of the Corporatocracy. The Wall Street establishment has always opposed entrepreneurs unless they go public with shares that the Masters of the Universe can manipulate. Both Cain and Moore have a long record of media appearances that often vary from the establishment viewpoint.

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Politics

Tuesday, April 16, 2019

Trump May Regret His Fed Takeover Attempt / Politics / US Federal Reserve Bank

By: Patrick_Watson

Some things are too important to leave to politicians.

One such thing: the money supply. That’s why the Federal Reserve is an independent agency, at least in theory.

Presidents like this arrangement because it lets them disclaim responsibility when the Fed does something unpopular. But that only works if the president doesn’t even try to assert control.

Trying to influence the Fed, as Trump is doing, has three possible outcomes—and two of them are bad for Trump. Either…

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Stock-Markets

Friday, April 12, 2019

The Fed Created an Economy of Zombies and Unicorns / Stock-Markets / US Federal Reserve Bank

By: John_Mauldin

Central bankers have a well-worn playbook for handling recessions.

Cut interest rates, increase liquidity, and otherwise shove capital into the private sector. This helps businesses hire more workers and raise wages. Then gradually remove all the stimulus as growth recovers.

This playbook truly fell apart in 2008. The system had so much debt that adding yet more of it didn’t have the desired effect.

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Interest-Rates

Wednesday, April 10, 2019

Is The Federal Reserve ‘Too Big To Fail’? / Interest-Rates / US Federal Reserve Bank

By: Kelsey_Williams

The term “too big to fail” refers to certain businesses whose viability is considered critical to the survival and effective operation of our economic system. These very large businesses are designated as too big to fail because their failure or bankruptcy would have disastrous consequences on the overall economy.

The potential effects are considered to be severe enough, and the costs so unbelievably large, that these businesses are afforded special attention and consideration in the form of bailouts and protection from creditors.

The expenses necessary in order to save a large institution from bankruptcy are considered less than the costs that would be incurred if the institution were allowed to fail. Active application and implementation of both alternatives were prominently featured in the financial crisis of 2008.

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Interest-Rates

Wednesday, April 03, 2019

Trump Readies Shake-up of Fed Banking Cartel / Interest-Rates / US Federal Reserve Bank

By: MoneyMetals

Establishment journalists, establishment economists, and establishment politicians are freaking out. It seems they can’t cope with the prospect of an outspoken monetary reformer potentially becoming the next member of the Federal Reserve Board of Governors.

President Donald Trump announced recently he would nominate longtime free-market advocate and close political ally Stephen Moore to a currently vacant seat at the Fed.

“Trump’s choice of former campaign adviser Stephen Moore to serve on the Federal Reserve Board is stirring misgivings among some bankers,” reports Politico.

“Economists are furious,” according to QZ. “The news has been met with a heady combination of derision, bafflement, and general hullaballoo, with Moore variously described as ‘a loyalist, not an expert’.”

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Interest-Rates

Tuesday, April 02, 2019

Why Is the Fed Paying So Much Interest to Banks? / Interest-Rates / US Federal Reserve Bank

By: Ellen_Brown

“If you invest your tuppence wisely in the bank, safe and sound, Soon that tuppence safely invested in the bank will compound, And you’ll achieve that sense of conquest as your affluence expands In the hands of the directors who invest as propriety demands.” — “Mary Poppins,” 1964

When “Mary Poppins was made into a movie in 1964, Mr. Banks’ advice to his son was sound. The banks were then paying more than 5% interest on deposits, enough to double young Michael’s investment every 14 years.

Now, however, the average savings account pays only 0.10% annually—that’s one-tenth of 1%—and many of the country’s biggest banks pay less than that. If you were to put $5,000 in a regular Bank of America savings account (paying 0.01%) today, in a year you would have collected only 50 cents in interest.

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Interest-Rates

Monday, March 11, 2019

The Fed Is Playing a Dangerous Game / Interest-Rates / US Federal Reserve Bank

By: John_Mauldin

Two months ago, Fed Chair Jerome Powell set off a market panic.

He suggested the FOMC would do what it thinks is right and let asset prices go where they may.

They promised at least two if not three more rate hikes in 2019. The stock market fell out of bed.

Fast forward to now. The Fed has given up its tightening dreams and might even loosen policy. It is even (gasp!) losing its fear of inflation.

The problem is that preventing small “crises” on a regular basis eventually causes a very large crisis.

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Interest-Rates

Wednesday, January 16, 2019

It’s Not Polite, but I’m Pretty Pissed at the Fed / Interest-Rates / US Federal Reserve Bank

By: John_Mauldin

This essay is going to insult a bunch of smart, maybe even brilliant, people. It is not polite nor is it politically correct. I will try to be better. But right now, I am pretty pissed.

Here’s the thing.

No serious scientist would run a two-variable experiment. By that I mean, you run an experiment with one variable to see what happens.

If you have two variables and something happens—either good or bad—you don’t know which variable caused it.

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Interest-Rates

Tuesday, January 08, 2019

Kendall and Hochberg: Interest Rates Win Again as Fed Follows Market / Interest-Rates / US Federal Reserve Bank

By: EWI

Most economists and financial analysts believe that central banks set interest rates.

For more than two decades, Elliott Wave International has tracked the relationship between interest rates set by the marketplace and interest rates set by the U.S. Federal Reserve and found that it's actually the other way around--the market leads, and the Fed follows.

The latest Federal Reserve rate decision on December 19 brought the usual breathless anticipation. Confusion reigned as the U.S. president as well as a former Fed board member publicly urged the U.S. central bank not to raise rates and many wondered if the Fed would "rescue" investors with a surprise decision to leave them unchanged. The Fed, however, did what it almost always does: it brought its rate in line with market rates.

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Politics

Sunday, January 06, 2019

The Fed IS the Ugly Truth / Politics / US Federal Reserve Bank

By: Raul_I_Meijer

This Fed thing just keeps going on, and it needs to stop. There is nothing in the discussion about the Federal Reserve these days that has any value other than it provides even more proof that the Fed has killed off the most essential elements of what once made the US economy function. All markets, stocks, bonds, housing markets, all price discovery, all murdered. No heartbeat. Pining for the fjords.

And instead of addressing that, and I’m not even talking about addressing fixing what is wrong, all I see is neverending stuff about Jay Powell using, or not using, terms such as “patient” or “accommodative”. Like any of it means anything coming from him and his ilk. Other than for making ‘investors’ a quick buck. Like a quick buck could ever trump the survival of entire market systems.

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Interest-Rates

Wednesday, December 26, 2018

Federal Reserve – Conspiracy Or Not? / Interest-Rates / US Federal Reserve Bank

By: Kelsey_Williams

Conspiracy surrounding the Federal Reserve is a subject of much debate. A controversial topic, yes;  one which stirs the imagination of some, fires the suspicion of others, and provokes the declamation of not too few detractors. 

From G. Edward Griffin/The Creature From Jekyll Island…

“Back in 1910, Jekyll Island was completely privately owned by a small group of millionaires from New York. We’re talking about people such as J. P. Morgan, William Rockefeller and their associates. This was a social club and it was called “The Jekyll Island Club.”

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Interest-Rates

Friday, December 21, 2018

FOMC Update - Jerome ‘Dead Eye’ Powell / Interest-Rates / US Federal Reserve Bank

By: Gary_Tanashian

One of the most disturbing scenes in the series Breaking Bad was when Todd shoots and kills a boy on a dirt bike after he witnessed Heisenberg, Jesse and Todd heist 900 gallons of methylamine. Jesse: “Todd, that Opie Dead Eyed piece of shit…”

That is similar to the feeling I got after the Fed hiked the funds rate as expected, but then declined to offer the stock market much relief for its ongoing temper tantrum.

What’s this? The Fed is not doing as the vast majority of market participants expect it to do? The Fed is not taking active measures to boost asset prices?

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Interest-Rates

Thursday, December 13, 2018

Trump vs the Fed: Who Wins? / Interest-Rates / US Federal Reserve Bank

By: Richard_Mills

Who controls the US economy? The “power of the purse” resides within the US Congress and the powers to set fiscal and monetary policy are delegated to the US Central Bank, otherwise known as the Federal Reserve.

While the success of US Presidents often depends on how well the economy does during their terms, in fact they have little direct influence on it. The President can guide the economy and put his stamp on unlimited pieces of legislation, but he must work with Congress and the Federal Reserve in order to execute his agenda.

To demonstrate just how powerless the President is over the economy, you need only look at Article II of the US Constitution which outlines the responsibilities of the Executive Branch:

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Interest-Rates

Wednesday, November 07, 2018

Arguing About Fed Policy Is A Waste of Time / Interest-Rates / US Federal Reserve Bank

By: Kelsey_Williams

When government (or a President) claims that Federal Reserve policy is hurting the economy, they are either grandstanding, or are ignorant about the function and purpose of the Federal Reserve.

No one wants to see the economy suffer, anymore than they want to see a plague, or infectious disease, affect millions of people. And no President wants to be in office to preside over a recession or depression. But neither can they exercise any power or influence regarding the implementation of Fed policy; particularly when it comes to interest rates.

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