I received an email from a subscriber asking me to comment on another alt-financial analyst’s article from late December, regarding the Federal Reserve’s possible intention to sink President Trump’s campaign with a market crash prior to this November’s Presidential election.
I normally would not comment on other people who I think are doing an otherwise decent job, and I do not wish to single out this person’s commentary, but I found it similar to many other writings in the alt-media. So, here is some analysis on the matter.
U.S. President Donald Trump’s trade war with China keeps undermining the confidence of businesses and consumers, worsening the economic outlook. This manufactured disaster-in-the-making presents the Federal Reserve with a dilemma: Should it mitigate the damage by providing offsetting stimulus, or refuse to play along?
If the ultimate goal is a healthy economy, the Fed should seriously consider the latter approach.
There’s even an argument that the election itself falls within the Fed’s purview. After all, Trump’s reelection arguably presents a threat to the U.S. and global economy, to the Fed’s independence and its ability to achieve its employment and inflation objectives. If the goal of monetary policy is to achieve the best long-term economic outcome, then Fed officials should consider how their decisions will affect the political outcome in 2020.
The Fed Shouldn’t Enable Donald Trump, William Dudley, Bloomberg, August 27th
Later that same day, Bloomberg published an article titled, Ex-Fed Official Dudley’s Call to Block Trump Draws Criticism, in which it said that Dudley’s op-ed comments were misguided and dangerous. Dudley also received a sharp rebuke from the Fed itself as a Fed spokeswoman said the central bank would not play politics.
The Fed rejected the suggestion that it would play politics with monetary policy.
“The Federal Reserve’s policy decisions are guided solely by its congressional mandate to maintain price stability and maximum employment. Political considerations play absolutely no role,” Fed spokeswoman Michelle Smith said in an emailed statement.
Pushback from analysts and economists also came thick and fast.
“Bill Dudley’s remarks are not only misguided but also dangerous coming from a former top Fed official,” said Gregory Daco, chief U.S. economist at Oxford Economics. “The Fed doesn’t have the luxury to stand idle in the face of a slowing economy.”
Jared Bernstein, who served as former Vice President Joe Biden’s chief economist, posted on Twitter that to “do what Dudley suggests compromises the Fed’s independence. Also, it could easily backfire as Trump often doubles down when challenged.”
Ex-Fed Official Dudley’s Call to Block Trump Draws Criticism, Bloomberg, August 27th
Okay, with this background, I want to consider the chances that the elites have already manipulated the outcomes of past presidential elections. I think it’s fair to contemplate they rigged the 1960 and 2000 elections. With respect to the elites’ use of the Fed, I can specifically think of the 2008 election in which the Fed’s willfully ignorant monetary policy guaranteed an Obama victory. Trump is no dummy and I am sure he obsesses about a possible redux.
With this as a preface, I offer you my response to this reader (edited for grammar);
Thanks for the email….
As for my blog, my overriding thesis is this; the central banks will do whatever it takes to keep the nation-states in business with them in control, and they are in control of their system. They have admitted they assumed control in late 2008, under the Bernanke tenure. Why would the Fed sabotage the Trump regime via a crash now? They would get the full blame and have to accept the responsibility.
If the Fed owners hated Trump, they would just rig the election and never tell us. I am sure they already have done this (Kennedy in 1960, Bush 2000, maybe even Trump 2016). Trump is just a puppet.
If the Fed “screwed up” they would get the full blame at this point. The Fed is being used by the elites to control the U.S. nation-state and have fully accepted the responsibility of keeping things going, and crashing it would only expose a partisan intent. This could actually work in Trump’s favor as it would be viewed through the lens of Dudley’s partisan remarks.
But this won’t happen. Trump has been complaining about Fed policy throughout his whole term. The spotlight is now on the Fed and the Fed cannot “screw up” like last decade. The Fed’s owners have all the power they want [and all the tools they need to keep things moving forward]. Bernanke said the same over the weekend.
Furthermore, Dudley was arguing as a former fed official as he left the Fed in 2018. He was appointed by Obama to the NY Fed. He is just a partisan shill and he has lost a lot of street cred after that Bloomberg editorial. I remember it.
The Fed sharply rebuked him and from what I can see, the Fed has fully enabled Trump with QE4.
The Fed couldn’t just come out and say we are going to undertake QE4 without any cause. For now on, the Fed will ramp up their programs after manufactured market blowups. Their M.O. going forward will be exactly as it was in the wake of the repo madness.
Trump doesn’t want to get rid of the Fed. Trump only wants ultra-loose policy and he is getting it. QE is MUCH MUCH more important than rate setting. QE allows the nation-states to stay in business.
The contention between Trump and the Fed preclude a 2008 redux
I agree with Ben Bernanke, the Fed has all the tools it needs to keep this system moving forward. Look how simple it was to solve the repo market problems last year. I relayed this to the reader that the Fed could easily solve this dilemma by placing Treasuries, on a permanent basis, onto the Fed’s balance sheet. They did so to the tune of $400 billion and the problem was solved immediately. Now, the Fed will use this as an opportunity to effectively regulate the overnight credit market.
Think about the market’s near collapse in late 2018. All throughout 2018, I said that the Fed needed to stop unwinding its balance sheet and begin QE again. Look what it did, they redirected everything from the brink and onto a new bullish market trend. The Fed even cut rates 75 bps last year. I told the reader that the Fed needed to start QE again in order to move things along, and it did. All the problems were solved in the asset markets. Bond yields fell across the board and stocks and real estate began to firm around the world.
After all this show of force by the Fed since late 2018, how can it crash Trump’s election chances now? Even if the Fed wanted to torpedo Trump’s campaign, it no longer can. It has already revealed its power to move the markets, so by feigning impotence to stop a downturn their excuses would be viewed as totally transparent and disingenuous. But the elites can still rig the votes or plan something else out of the blue. However, that is not part of my expertise nor within the scope of my analysis.