After getting a public twitter scolding from President Trump for letting the Dow reverse into red yesterday Jay Powell was not about to let the same mistake happen twice and came fully prepared ready to jawbone today.
Is the presumption ridiculous? What isn’t ridiculous these days?
A president watching every tick on the $DJIA and grading the Fed Chair on it?
When Jerome Powell started his testimony today, the Dow was up 125, & heading higher. As he spoke it drifted steadily downward, as usual, and is now at -15. Germany & other countries get paid to borrow money. We are more prime, but Fed Rate is too high, Dollar tough on exports.
— Donald J. Trump (@realDonaldTrump) February 11, 2020
Or a Fed Chair whose renewed easy money policies have propelled stocks sky high using the opportunity to jawbone markets higher by promising even more easy money:
The times we live in. pic.twitter.com/L3Sgmf7Iwp
— Sven Henrich (@NorthmanTrader) February 12, 2020
Yes this is the moment in time JayPowell assured markets to save them if there’s any trouble ever:
“Federal Reserve Chairman Jerome Powell said Wednesday the central bank would fight the next economic downturn by buying large amounts of government debt to drive down long-term interest rates, a strategy that has been dubbed quantitative easing, or QE.
In testimony before the Senate Banking Committee, Powell said the Fed had two recession-fighting tools; buying government bonds, known as QE, and communicating clearly with markets about interest-rate policy, routinely considered as “forward guidance.”
“We will use those tools — I believe we will use them aggressively should the need arise to do so,” Powell said.”
QE and jawboning. Swell. What exactly have they been doing this past year?
While ECB president Lagarde admitted yesterday that loose monetary policies are stoking asset prices higher, the very assets owned by the top 1%, Powell goes on to say how great it all is:
Powell: “it’s been a particularly good time to be at the top of the income spectrum”.
*the parties are awesome pic.twitter.com/eCfwdvIMRa
— Sven Henrich (@NorthmanTrader) February 12, 2020
Chumming it up at the Jeff Bezos party the other week he ought to know what a good time it is to be at the top of the income spectrum. After all he is there himself.
Problem is of course all these loose monetary policies have done exactly nothing for the the rest of the population since the financial crisis:
And so the solution is to do more at the first sign of trouble.
The audacity of the claim is of course pretending that this is not exactly what they have been doing ever since markets plummeted 20% in Q4 of 2018. Jawbone and QE and repo. Powell, like his processors before him has shown to be beholden to markets, to appease them, to make sure they don’t get disappointed. Another easy money shill. At the first sign of market trouble he ran scared and flipped and flopped and now he will never make the mistake of policy tightening again. He is a perma dove now, he will always ease and use “forward guidance” (jawboning) to keep markets from dropping too far.
After all that’s exactly what he has been doing since 2019:
Central bankers still pretend to deny that repo has no impact on asset prices when participant behavior clearly has shown that this is exactly what’s happening.
There is an easy way to refute the claim of course, but the Fed won’t dare:
Stop repo completely for a week.
Just try it.
Start tomorrow.
Watch what happens. https://t.co/mzALQlvMPN— Sven Henrich (@NorthmanTrader) February 12, 2020
And so here we are in 2020, with the highest market valuations in history on many measures and all they’re talking about is more QE and jawboning.
11 years after the financial crisis there is no path to balance sheet normalization, there is no path for rate hikes, there is only the path of more intervention to disproportionally benefit the same people that have benefited for the past 11 years.
Permanent intervention. That’s their answer. That’s intellectual bankruptcy and exposes central bank policy to be an empty suit.
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Categories: Opinion
Sven, Love reading all the stuff you write. But at the same time it makes me angry because what you write is so TRUE. With that Asshole running the printing press to help the rich what can a few do about it. I study your work because the time will come– and you will be right. What will stop all this QE??? Bubble .. God help us.
Time for a Coup!
i can’t belive what i see on the charts every week , 1 year ago it was a joke with my friends to see those levels ….
The FED’s deep pockets and their broker/dealer co-conspirators are overriding everything including common sense. I hope I’m wrong, but the American public has little knowledge of what’s actually going on and these guys in charge have no comprehension of sound fiscal or monetary policy. The federal deficit has surged 25% – no problem. No fundamentals, no technicals – no problem. Non-GAAP accounting practices, MMT, sounds good. Gimmick, gimmick, gimmick, sounds good. There’s no way to stop the liquidity from pushing this market to the moon, Alice. Sven, keep up the good work.
Actually, it’s not really the Fed’s “fault” as much as they are forced into what they are doing by the US Treasury. Since last September the US Treasury has been FORCING the Fed to print money to top up the Treasury General Account with fresh magic money they have to issue, without even issuing a pretend bond. Just complete money for nothing, absolute thin air money. That Money is then pushed through the system by the Treasury disgorging it, ending up almost immediately through the magic of electronic fund flows in Hedge Fund accounts early morning every day, before market open. The Hedge funds come in to levitate all indices before market open, then they together with Treasury and Plunge Protection Team operations more often than not keep the markets completely flat all day and quell the VIX. At market close the market is largely sold at the closing price (see the final minute spike in volume every day now, with little effect on price) with funds and shares parked somewhere overnight, then the same happens again next morning.
Trump is using the Treasury and the country’s money to play the stock market, which has become a casino, in order to win the election. Powell is merely his ***** in all this. I almost feel sorry for him. But no-one has any backbone left to stand up to what has become a mafia state run by a Machiavellian con artist who would not be beyond stock market manipulation for his own electoral ends.
And the populace is happy with that. Bread & Circuses and artificially priced 401k’s at election time. Caligula had his supporters too, I suppose. Authoritarian National Socialism is really what most people want at the end of the day.
Whilst reality is the market is now too expensive and too much of a casino for people to properly invest and build their nest egg themselves. Trust has gone in the markets and the system.
so the more virus infections, the more they will have to print….