Fed Chair Jerome Powell testified in Congress today and was peppered with questions on inflation, liquidity, and bank failures.
CNBC reports Powell expects more Fed rate hikes ahead as inflation fight ‘has a long way to go’
- Federal Reserve Chairman Jerome Powell on Wednesday affirmed that more interest rate increases are likely ahead as inflation is “well above” where it should be.
- “Inflation pressures continue to run high, and the process of getting inflation back down to 2% has a long way to go,” he said.
- Powell said the labor market is still tight though there are signs that conditions are loosening.
Prepared Remarks
Here are Powell’s Prepared Remarks for the Fed’s Semiannual Monetary Policy Report to the Congress
In answer to one question, Powell stated “We need to update our thinking on liquidity regulation.”
More accurately, the Fed needs to update its its thinking across the board. The Fed consists of a pack of groupthink participants who believe in an array of economic models that do not work and never did.
To get into the club, you have to think act and believe like the rest of them on inflation expectations, on the Phillips curve, and regulation.
Dear FDIC and Fed, We Need a Genuine Safekeeping Bank, Not Band-Aids
Regarding regulation, Dear FDIC and Fed, We Need a Genuine Safekeeping Bank, Not Band-Aids
Yesterday, I wrote about groupthink bias in Artificial Intelligence Is Beating the Professional Stock Pickers
Eurointelligence commented “Our hypothesis is that modern machine learning methods would outperform them [economists], and do so by a wide margin. This is quite astonishing because there is absolutely no economics input in those new forecasting methods. The winner of the stock market competition was totally ignorant of financial economics. The main reason for the relative success of the new generation of forecasting models is lack of bias.”
The O/N RRP volumes dropped below 2 trillion. With T-Bills yields higher than the award rate, there’s an increase in the supply of loanable funds.
you missed the whole point of the FED. the FEDRESNY is owned privately, where all the money making happens. it’s owned by NYC bankers. the only mandate is to keep the banks in nyc in high cotton. JPM……will kick to the curb many regional country banks in the next 5 to 10 years. same as they have done for past century. all the hooey about how dumb the fed is, really misses the whole swindle. look in the mirror and see the mark. i’d surmise less than 5% of market players know what the fed really is. seems like mish, misses the point, with all due respect. i admire this blog, especially the r/e analysis. but the FED analysis is really completely incorrect. the new blog set up seems decent. good luck with the improvements you discussed above.
Do you wonder why the Fed paused raising rates even as they admitted that more needed to be done? Perhaps this will give some insight:
link to occ.gov
From the bullet points of that report:
“derivative contracts remained concentrated in interest rate products, which totaled $160.3 trillion or 73.6 percent of total derivative notional amounts.”
Then check out “Table 20: Notional Amounts of Derivative Contracts by Contract Type and Maturity (Interest Rate and Foreign Exchange Rate)” and observe the top 4 banks and the figures contained in that table.
Powell bloviates, again, while the BOE actually does something about inflation beyond throwing cotton balls at it:
link to cnbc.com
Would be surprising if the Fed would do something more than give the illusion of fighting the good fight.
Powell stated “We need to update our thinking on liquidity regulation.”
Who goofed?
A dollar bill which turns over 5 times can do the same “work” as one five-dollar bill that turns over only once. Liquidity is pervasive.
A dollar bill you turn over 5 times will not present the same side as when you started turning. Liquidity is slippery.
“A dollar bill which turns over 5 times can do the same “work” as one five-dollar bill that turns over only once.”
Not for any economically meaningful measure of “work.”
With the single dollar, anyone is broke as soon as the bill is turned over. While with the $5, 5 guys can simultaneously have $1 worth of savings/investment/capital. Having a cushion is both 1) an economic good in the final consumer good sense, and 2) allows for optimization over a longer term, hence improves rationality, hence future growth.
Only economic rank illiterates, are dumb enough to only look at immediate quantity of “activity” (as in GDP etc.) as some sort of meaningful measure of economic utility.
Coming up soon:
1: A way to jump straight to comments section
2: Home button
3: Economics/Politics toggle – But I intend to not write too many purely political posts – needs to be a strong economic angle
I am working on ads so will not be ad-free for much longer but they should be much higher quality ads, no pop-ups, and will not interfere with commenting – Will be testing different layouts
As fantastic as it sounds, economics is an exact science (like Irving Fisher said). But people like Jerome Powell don’t get money and central banking. Powell thinks banks are intermediaries between savers and borrowers. Powell’s peanut sized brain thinks in terms of an individual bank, as opposed to the commercial banking system as a whole (i.e., conceptually).
All time deposits are derived from demand deposits. As time deposits grow, demand deposits are depleted dollar for dollar. It’s a closed system. All deposits are the result of lending, not the other way around.
And saver-holders never transfer their savings outside of the banks unless they are hoarding currency or convert to another national currency, e.g., FDI.
“Liquidity Regulation” went the way of Regulation Q Ceilings.
Chat GPT: “The rationale for Regulation Q ceilings was to protect the profitability and stability of banks by reducing their cost of funding and discouraging excessive competition for deposits23. However, the regulation also had unintended consequences, such as creating a gap between market interest rates and deposit rates, encouraging disintermediation (the movement of funds from banks to other financial institutions that could offer higher returns), and stimulating the growth of money market funds and other alternatives to bank deposits.”
That’s the pervasive thinking. In reality, unknown to Chat GPT, the NBFIs are not in competition with the DFIs. The NBFIs are the DFI’s customers.
You can’t trust machine learning. And you can’t trust Powell.
“As fantastic as it sounds, economics is an exact science”
It’s not even a “science” at all. Just deductive logic from a few very unassailable universals.
The universal idiocy and complete failure of all and everyone dumb/nefarious enough to believe/pretend it has anything whatsoever to do with a “science”, is inevitable and will never change.
The Fed can only print money. Which does not in any way change the stock of real wealth. To the extent anything they do “saves”, or even improves the conditions of (which in economese translates to increases the wealth of..), anyone at all: ALL that wealth HAS TO be transferred from, aka take from, someone else. Ergo: All the Fed does, is redistribute wealth:To those they care about: From those they don’t. EVERYTHING else, is just obfuscation.
It does seem as if Keynes was right with his “not one in a million” quip, though. Unfortunately, and sadly, enough. A bunch of completely illiterate idiots dumb enough to fall for the scam that it is somehow “necessary” for them to be robbed for no reason. Just so that other idiots can have some loot redistributed their way and pretend to be “smart”, or for that matter even basically useful.
As with nearly everything these days groupthink prevails. Its as if we have gone back to the Middle Ages.
I doubt economists will ever figure out that there is more than one “school” of economics.
Jerome Powell admitted he is a Deadhead. Wow, that’s incredible. Ramble on, Rose.