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Fed’s ‘Free Lunch’ to the Rescue!


Trump needn’t have wheedled the Fed about juicing the money supply, since the banksters, ever eager to ride to the rescue — of themselves — would have done it anyway. The central bank wizards and alchemists have once again begun to “manage” our “expectations” with all the subtlety of a carnival barker touting the Big Six wheel. Their loyal spinmeisters at The Wall Street Journal gave this latest feint toward QE a boost Thursday with the headline Fed Begins Debate on Whether to Cut Rate as Soon as June.  Debate, my ass. To merely hint of a rate cut is to commit to one irrevocably, since anything less would — heaven forbid! — disappoint investors.

The policy debate ostensibly will pivot on whether ‘trade tensions’ warrant a shift toward easing. These are the very same tensions we’ve been reading about for nearly a year, and they were of such little concern as recently as a month ago that Fed chief Powell played down the possibility of a rate cut this summer. We knew better. Although the eggheads at the Fed would have us believe they use sophisticated tools to shape monetary policy, they are guided more by the stock market’s ups and downs than by anything else. Thus did the Dow’s 700-point decline earlier in the week evidently convince them it was time to intensify the managing of our expectations. We all know we are being played, but because the outcome is perceived as a win for everyone, the QE con-game cannot but work. But we might ask: Who actually wins when the Fed expands its balance sheet by purchasing public debt? Only an economic imbecile could believe that this epic charade can continue to provide us all with free lunch more or less indefinitely.

Comments on this entry are closed.

none June 7, 2019, 8:46 am

That is a very good point on the FED process if one observes such as a way toward building positions.

Good comment.

I would mention somewhat as just as simple what Frankie Joe would say years ago (KISS).

The analog of the CL market has an exact process towards the major SPX/INDU indexes, having that it has just hit a 20 trading week low point.

The Indexes will follow and do the same.

Have a great weekend Rick.

law June 7, 2019, 5:57 am

The Lunds accumulated enough gold to disperse it higher prices

Thomas White June 7, 2019, 3:34 am

I wonder why the Fed spokesmen find it necessary to speak of cuts and/or QE outside of the statements after each FOMC meeting? In between times, the market should be allowed to “fluctuate…” It’s got to be “bad business,” longterm, to be beholden to the tantrums of the markets. The Fed should stay out of the business of placating the financial markets and focus on growth of the economy and keeping inflation in check–which, for now, and the foreseeable future, it surely is…

John Jay June 7, 2019, 12:50 am

The “Free Lunch” has been confined mainly to the USA, the larger countries in Europe,the KSA,and Japan.
Most of the world is trying very hard to get into the USA and Europe to get some “Free Lunch!”
Japan and the KSA don’t allow millions of low IQ, penniless vagrants to use their countries as a flop house, free HMO, etc.

Trump is at least going through the motions of MAGA, which is why he is so hated in DC.
One has to laugh at the last 40 years as Congress along with every POTUS talked tough on Free Trade/Open Borders and never did anything but enable and defend both policies.
I don’t blame Trump for strong-arming the Fed to lower rates, Obama had eight years of falling rates. And Volcker went out of style in the Reagan administration! LOL!

The biggest laugh is Congress acting defenseless as liberal Federal judges time after time blocked attempts by concerned States to end the Super Citizen status of illegal aliens.
When, the truth is, Congress has the power to remove any Federal judge right up to a Supreme Court justice. I believe the SCOTUS and Appeals court judges require impeachment; lower Federal court judges can be removed with a simple voice vote.

If a Federal judge is taking the country down the road to ruin, he should be removed, there is nothing sacrosanct that requires the lifetime appointment to become a suicide pact.

And how often has Congress removed nation wrecking Federal judges?
Exactly never to the best of my knowledge.

Take the Roberts vote on Obamacare. Congress knew that law was written by insurance lobbyists to pay for free healthcare to the SNAP card crowd while doubling or tripling the premiums for Legacy Americans.
His lame “It’s a tax!” would have gotten him kicked off the bench if Congress was doing their job. But Roberts was just a ringer and Congress got the big payday from K Street at the expense of Main Street.

Instead, Congress wants to impeach Trump for doing his job and attempting to finally shut down the torrent of parasites flooding in here.
Go figure?
“Follow the money!”
And when Powell cuts rates, it will be because the guys really running the show at the Fed member banks tell him too.

tom Sargent June 6, 2019, 7:06 pm

Lowering the fed funds rate is bullish for gold. That’s probably why it’s up in the last few days. People know the Fed can’t constrain themselves when the market stumbles.

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