Can the Fed sabotage Trump’s election or has Trump taken that opportunity off the table?
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.
Don’t worry about an Obama appointee. Trump’s Fed criticism precludes a repeat of 2008
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.
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.”
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);
Hi Dave,
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.
I’ve been following you for about 6 months now after hearing about you on the […] blog. My question is should I start investing in RE now or just buy gold instead for now.
I am worried about the eventual downturn in the economy and people’s ability to pay rent. Rents in my area (Northeast PA?) are in the $1500.00 to $1800.00 range. I know of many people working three part time jobs with the bulk of their income going to rent. Also when the socialists return to power, I think there [may be] a change for rent controls, or worse, as mentioned in that blog recently.
As the Fed continues QE, shouldn’t the price of gold rise eventually? It seems the better option and less stressful. I am 62 years old, no debt, blue color, self employed, married, 1 child in college. Just trying to get through the reset without getting wiped out. I am worried about my family. Sorry for the long post. Thank you for all you do, for opening our eyes to the way things work.
Happy New Year and God bless.
Bill
Since 1971, the asset markets over the long-term are actually very predictable
U.S. Federal Housing Finance Agency; All-Transactions House Price Index for the United States. Compared to the other major asset classes, including gold, housing has underperformed in many areas, but housing has the potential to generate a lot of income for its owners.
So what if your worst fears were realized and the dollar collapsed? It has been collapsing in value since at least 1971, when the Nixon regime shut the international gold window.
Below, I show the performance of the Wilshire 5000, since the shutting of the gold window in 1971. In 1981, the IRS issued proposed regulations on 401(k) plans that sanctioned the use of employee salary reductions as a source of retirement plan contributions. Many employers replaced older, after-tax thrift plans with 401(k) plans and added 401(k) options to profit-sharing and stock bonus plans. Within two years, surveys showed that nearly half of all large firms were either already offering a 401(k) plan or considering one. The Dow Jones Industrial Average closed 1981 at 875.00. The massive subsequent performance of the domestic stock market was no coincidence.
Based on the log scale, the performance of the Wilshire 5000 index since the U.S. shut the gold window has been fairly predictable and even. The Wilshire 5000 is a market-capitalization-weighted index of the market value of all US-stocks actively traded in the United States. This chart does not include dividends.
Why was the stock market crash in 1987 so short-lived? Why have all subsequent stock market corrections been short lived? There are literally trillions of dollars waiting to be deployed; either by employees, employers, governments, or central banks. Are you going to stand in front of this freight train?
There were hundreds of billions in defined contribution dollars after the 1987 crash ready to be deployed within a couple years, and this flood continues to this day. Now, that amount is in the trillions and I do not care what the alt-financial media think. As many as 80% of the population may eventually agree with many of the aspects of what the alt-media proclaim, but by then it will be too late for them to matter. Because of the powerful and sinister effects of the internet and social media, the average person on the street can no longer control his spending impulses and humans have been conditioned into spending every last cent of their money.
All that consumer debt-slave spending goes to the top 10%, and those in that top echelon are now the only ones who can affect this system. The small person is now powerless to stop this self-generating dynamo. They cannot stop spending and are the unwitting victims of a parasitic, Hindu-style, predatory monetary and economic system.
Since 1971, gold has done very well over the long term. Its total price performance is similar to the Wilshire 5000, but it generates no income and is much less liquid.
Think about the other freight train. Imagine all those overseas dollars looking for a home. In 2018, the Federal Reserve Bank estimated that 80 percent of all $100 bills were held in foreign countries. It explained that residents in other countries, particularly those with unstable financial systems, often use the notes as a safe haven. In any protracted dollar run, these dollars will have to find a home somewhere. I say they will continue to gravitate to global real estate and domestic stocks. Perhaps these dollars will also seek gold and other non-consumable commodities.
The whole system is being nationalized and given over to the elites
Think about what happened in the overnight dollar lending market during the second half 2019. The Fed is using it as a justification to effectively regulate and nationalize the entire short-term lending market. Read this article from today’s Barron’s to see what I mean.
“Various [FOMC] participants remarked on issues related to the implementation of monetary policy, highlighting topics for further discussion at future meetings,” the meeting minutes said. “Among the topics mentioned were the potential role of a standing repo facility in an ample-reserves regime, the setting of administered rates, and the composition of the Federal Reserve’s holdings of Treasury securities over the longer run.”
I also have been observing many economists who are conjuring up tentative ideas to combat the next downturn. A popular one; direct injections of government money to the end-user to be used for general spending purposes.
Hand out some benefits and the debt slaves will never revolt
With interest rates already so low, the Federal Reserve can’t fight a downturn by itself, and so economists are casting about for new ways that government spending can be used spur demand.
And funnily enough, one excellent way to get your local community humming would be to send everyone a $1,000 coupon to be used for dinner at restaurants of their choosing, said Gabriel Chodorow-Reich, an economics professor at Harvard University.
At a panel at the American Economic Association, economists discussed a range of ideas to use fiscal policy to counter downturns.
Former U.S. Treasury Secretary Lawrence Summers suggested that Congress develop “semi-automatic stabilizers” or targeted spending that would be triggered automatically if there was a rise in the unemployment rate.
This would help get around the sometimes slow pace of Congressional decision-making.
Here is an article from today’s MarketWatch, titled, To fight the next recession, the government might send you money so you can go out to dinner with friends. If these types of programs are enacted during the next downturn, do you think the alt-media will be able to convince the average recipient that these programs are holding them back? Absolutely not. The elites will control the sheep by handing out these benefits to keep spending levels elevated, while the debt-slaves will only direct the resulting profits to the top levels of society. Since this spending will be financed with debt, inflationary growth should be minimal.
My most important advice; We need to drop the fear and change our mindset
My views are more sobering than most others in the alt-financial media, because they either believe we can turn this around or will propagandize like ZeroHedge with its self-loathing, anti-Western propaganda. I submit, we may have to wait a long time for any collapse, since most on this planet do not care what system they operate under, as long as they can have fun.
I differ, because I conclude that there are no longer any viable solutions for an ungodly global population. Our monetary and financial systems are a direct reflection of humanity’s moral compass and humanity has been corrupted to the core. The teachings of the Bible have been methodically adulterated and its philosophy has been effectively thrown into the trash heap of history.
With this in mind, I would advise all my readers to unplug from the collapse and reset talk that the alt-financial media are spreading. Imagine the tens of millions of dollars that ZeroHedge earns for its propagandist owners. Think of all the alt-media charlatans who earn tons of money off their crash-and-burn hype. It’s much easier to exploit people’s fears than to take risk and invest, as we do.
Case in point, this latest round of Iran war talk has injected a fresh round of “reset” scaremongering and I am certain that ZeroHedge’s page views skyrocketed over the past couple days. The elites running the new world order have been desensitizing us to a showdown with Iran since the Iranian hostage “crisis” in 1979. That was 41 years ago. I also recall the Iraq/Iran War of the 1980’s, which stretched on for over seven years. I remember during all that time how the Christian prophets on AM/FM radio thought Jesus’s return was imminent. What an embarrassment they turned out to be for the Christian faith and Bible. It’s not difficult to understand why real Christianity has become a running joke to most people on this planet.
During my undergraduate days, I recall my then-girlfriend’s father loading up on gold in anticipation of a big hyperinflationary downturn. Guess what, he eventually died with little money as their family struggled financially in a little house on Long Island. Why bother planning for the future when it will all come crashing down anyway? Unfortunately, things have a tendency to move in the same direction for much longer than we anticipate.
I can advise a person to do this or that, but if he or she cannot break free from their hard-wired biases, conditioning, and fear, he will always make fear-based investment and personal decisions. That is a recipe for disaster.
As for real estate or stocks, if a person has vacillated about getting involved all decade, I would suggest that he not get involved at this point. It takes a certain type of person who wishes to venture into these markets and not everyone is cut out for it. Many prefer risk aversion and there is nothing inherently wrong with this mindset, per se. My wife is extremely risk averse, while I prefer to take the risks. It works out well for us.
The internet is a killer to most people’s finances. Instead of empowering, the internet enslaves and impoverishes.
However, all is not lost. We all can still take some preventive actions to help ensure our long-term financial viability. We need to stop spending money like everyone else. We should restrict our social media usage to ZERO minutes a day. For those who are too fearful to use debt to buy income generating assets, I advise to eschew all forms of debt. College is not worth it anymore, unless you can get a degree that can teach about money and economics. Stay liquid in cash and gold, and stop worrying.
We have no control over who gets elected and the policies they promulgate, but we can see from the above charts that it doesn’t really matter. The freight train of central bank money and deficit spending is unrelenting. If socialists get into power, we know that the massive deficit spending on benefits will be negated by higher asset prices. Tax cuts results in the same outcome. Short of outright communist-style expropriation, real estate and rents will move higher as a result as supply is effectively restricted.
I don’t have anything else to add, but if we can overcome our mental handicaps, I have to believe the opportunities will appear and be self-evident.
Happy New Year to all those who stop by my website. I think for many of my listeners and readers, we viewed 2019 as a prosperous and productive year. Since we need to make hay while the sun shines, we were able to leverage the circumstances in 2019 to fatten up our balance sheets, and while I cannot guarantee that 2020 will provide us with a repeat of such auspicious conditions, we will certainly be more prepared if adversity comes. If we have built up our assets properly during the fat times, we can look to the lean years as opportunities to advance.
Though these numbers may be as a result of thawing trade tensions, if this breakout proves lasting, the Fed may have problems.
-A few thoughts about Fed QE and potential stumbling blocks.
-My concerns about commodity price pressures. My thoughts about rising CPI data.
The breakeven inflation rate represents a measure of expected inflation derived from 10-Year Treasury and 10-Year Treasury Inflation-Indexed Securities. The latest value implies what market participants expect inflation to be in the next 10 years, on average.
