The Fed Itself is Under its Greatest Scrutiny in a Long Time
By Chris Temple – Editor/Publisher
(NOTE: A recent broader dive into many subjects related to the below can be found at https://www.youtube.com/watch?v=w9RXYwsJ-3E&t=302s. Also, be sure to keep up with both my web site and my own YouTube channel—that latter is at https://www.youtube.com/c/ChrisTemple –as I will shortly be putting together a series of videos on these critical subjects.)
If I asked you how you wanted to leave this earthly life—your choices are dying either from cancer or heart disease—what would your answer be?
You might possibly say “I don’t like those choices, Temple. How about old age?”
But those aren’t on the table, to your dismay.
Similarly, our economic life as a nation (and that of each of us as consumers, citizens and investors) faces a similar Hobson’s Choice.
Your first choice…
…and if you don’t like that, here’s your second.
Having first created for us all the prospect of a slow death due to the highest rate of consumer price increases in four decades, arsonist-turned-fireman Jay Powell and his band of born-again inflation fighters are now telling us we have but one other choice: recession, millions unemployed anew and the rest. That is what the price will be in order to avoid any more of the first malady. That is the fate which will save us from the former(?) one.
Now, you, I and the overwhelming majority of our fellow investors and citizens might—as above—wonder WHY on Earth those are our only two choices. But they are, under our present banking/monetary system and its priorities.
Thus—with Powell and the rest of the Fed officials continuing to talk tough and unanimously promising several further moves to raise interest rates—the populace is restless and beginning to ask WHY these are our only two choices. And this is the third time in the last 20 years we have seen such derision of the Fed specifically and top-down central banking generally. The question is, whether real, people-benefitting change will come this time.
Back in the early stages of the dot-com crash and larger bear market and recession, former Fed Chairman Alan Greenspan rightly came under a lot of scrutiny and scorn. After all, he was largely to blame for—first—stoking the crazy bubbles of the late 1990’s and then running an erratic policy to boot on both sides of Y2K. For a while in 2000 and later, he tightened monetary policy even as his prior bubbles started losing their air.
But then September 11, 2001 came along. And, presto! The recession and bear market—which proceeded to get much worse over the ensuing year, with the S&P 500 ultimately dropping by 49% and the Nasdaq by a staggering 89%--were no longer the fault of Greenspan specifically or the fractional reserve banking system generally. All this was now the fault of Osama bin Laden and his terrorist comrades.
Fast forward to 2008 and the Great Financial Crisis. This time around, Greenspan had added unregulated derivatives to the mix; and this—along with policy decisions in Washington’s elected government that fostered this—especially turned real estate and mortgage markets into a giant casino. That all imploded. Once again, the hoi polloi were indignant: over losing their homes and valuations in their retirement accounts, all while seeing the rich get richer and/or bailed out.
Taking the reins just before all this blew up was “Helicopter Ben” Bernanke; previously Greenspan’s “Igor” but now the new Fed Chairman in charge of all this monetary/credit alchemy. With the changed personalities, the scorn did not come as quickly; people forget quickly and seemed willing to give the new Fed head the early benefit of the doubt to get us out of the mess that THE FED AS AN INSTITUTION had once again made.
Ultimately, the unveiling of Quantitative Easing re-blew all the former asset bubbles. And notwithstanding the continuing but isolated attacks now and then on the Fed institutionally from the likes of former Congressman Ron Paul (R-TX) and others, recovering stocks, a recovering economy and new play-toys for investors in the form of crypto currencies kept the wolves sufficiently away from the central bank’s door.
Now, we have “Fire Marshall Jay.” Just like the iconic comedic character portrayed once by a new young comedian named Jim Carrey on In Living Color, Powell seems hell-bent on wrecking at least the current economy—if not global markets anew—in his playing of a fireman.
Unlike in those past episodes, however, there is much more in the way of a broad-based push-back against Powell and what seems at times to be a suicide mission. Regrettably, the great majority of it is ill-informed even if well-meaning: virtually never do we hear anyone articulate the major institutional flaws behind the Fed and the system it administers, which—as a matter of simple mathematics—MUST favor the system and the proverbial 1% as opposed to the 99% of all the rest of us.
But hey: we have to start somewhere, right?
One unfortunate thing is that many career politicians, policy wonks and government operatives don’t know how (or won’t) come up with the systemic answers needed to extricate ourselves from the central banks’ Hobson’s Choice regimen. But some seem to be trying, even if they are somewhat just flailing away at how to “solve” what IS a major problem of inflation at 40-year highs.
Take this piece: https://www.zerohedge.com/markets/un-demands-all-central-banks-stop-rate-hikes-and-switch-price-controls-instead. Price controls have never worked, and do not solve the underlying issues. This is the equivalent of going back to using leeches to cure patients of certain maladies. But what you do also see questioned in this piece by U.N. officials is the subject of the shadow banking regimen created by the Mad Monetary Scientist Greenspan and enabled by his successors, together with all the speculation in markets that has fostered.
And you do as well see some discussion of looking to greater supplies of goods/services as a possible solution or—at least—amelioration of the inflation problem.
This is a discussion whose time has especially come. After all, from Powell on down at the Fed—and notably, among the likes of former Democrat Treasury official Larry Summers and one Republican counterpart Gary Cohn (see https://finance.yahoo.com/news/gary-cohn-on-inflation-relief-were-going-to-have-to-see-job-destruction-100417449.html where the latter is concerned) we’re told that we need to bring supply and demand back into balance to whip inflation. And automatically, to them, this means crimp demand via a recession, unemployment, and the erosion (not too abrupt, mind you) of real estate and stocks, especially.
Of all the ways to call “foul” on this quackery, it seems as if many are coalescing around the idea of one or more means to increase supplies of what is needed. All else being equal, for example, consider that if U.S. oil production was not presently some 1.5 million barrels/day below its pre-Plannedemic peak, crude products might not be so expensive right now. Consider as well all the various metals, materials and more needed for the Green Economy roll-out. Electric vehicles might not be soaring in price so much if (in this case) policy makers at The Biden Administration had not done so much harm to this point in crimping said supplies.
On this front, I’d urge you to check out The Coalition for a National Infrastructure Bank (see https://www.nibcoalition.com/ ). They and their proposed bill in Congress would be a part of a solution to the supply side of things: and further, see that the never-ending expansion of the money supply/debt is at least put to productive, people-centered uses for a change.
A corollary to this discussion has to do more specifically with housing: and shortages of affordable housing in much of America serving to drive/keep rents sky-high. The Bipartisan Policy Center is weighing in on this somewhat; see https://www.housingwire.com/articles/bipartisan-policy-center-proposes-legislation-to-address-housing-crisis/. Here again, supply of what is expensive thanks to the Fed’s inflation needs to be increased as a part of the equation to make housing more affordable.
These and other things essentially within the present system could improve things, IF Congress and other policy makers are able to break their fixation with 1. The sacrosanct Fed as an institution and 2. Everyone’s respective pre-conceived economic notions. For neither Karl Marx nor Adam Smith have the solutions to what ails us, when you get right down to it.
And that is why the above and related push-back against the Fed MUST eventually move toward changing the system itself.
To be continued…