Is the Fed playing politics? Does the Fed know what it’s doing at all? 
Fedthink!
Today I coined a new word, Fedthink. I hope it catches on. Here are some reader thoughts and my comments on them from a recent post.
Regarding Fedthink
Reader: Sometimes I wonder if people like Mish really think that the Fed plays it straight in times like this, versus telling us what is ostensibly the straight dope while they are actually playing some complex metagame.
Mish: I have commented on this before. The Fed believes the nonsense they preach on 2% inflation, inflation expectations, the Phillips curve and other economic nonsense that amusingly even the Fed’s own studies prove wrong.
There is no diversity in thought at the Fed. You get in the position of Fed Governor or President by thinking the same way as the rest of the members.
People confuse diversity with race and sex. True diversity is in thought. But there is no diversity of thought at the Fed. They have all been trained to be ignorant. And you do not get into the group unless you believe the same things.
This we call Fedthink.
Regarding Debasement
Mish: [Regarding why gold was $43 per ounce when Nixon killed gold convertibility, and is over $2,800 now.] “What’s changed is persistent Fed and government-sponsored inflation.”
Reader’s Accurate Assessment: Or to put it another way, it’s currency debasement. The dollar is not sound, it is a sliver of a fraction of itself from early last century, but has held its position relative to other currencies.
Regarding Platinum
Reader: Platinum, which is much scarcer than Gold, hasn’t budged in price in 5 years. It remains around $1000 per oz. Based on the gold price it should be something like 30-40K an oz.
Mish: Platinum is nearly 100% an industrial commodity and has to compete with palladium. Also the primary industrial use is in catalytic converters of which there is no need in EVs. Gold’s primary use is as a monetary metal.
Regarding Jewelry
Reader: 50% of gold is used for jewelry.
Mish: Nearly 100% of gold ever mined is still in existence. Yearly production is miniscule. The supply of gold is 100% of gold ever mined minus what is lost at sea, buried and forgotten, on in valuable art pieces in museums. Of the rest nearly all in bars. You confuse the supply of gold with annual production, a major error.
I looked this up and there is more gold in jewelry than I thought but less than my reader thought.
USGS says there are about 244,000 metric tons of gold of which 57,000 metric tons are in underground reserves. 92,000 tons of gold are currently used in jewelry according to the World Gold Conference. That’s about 37.7 percent is in jewelry, much higher than I expected, but still consider a monetary use.
Finally, I have no idea how much of that jewelry is in priceless museum pieces, not for sale, and not really part of overall supply of gold. The same applies to old gold coins that are worth much more than their weight in gold. So 37.7 percent is in practice overstated.
Regarding Bitcoin
The supply of Bitcoin is every Bitcoin ever mined minus lost keys.
Many Bitcoin advocates confuse halving (the rate of increase in supply of Bitcoin) with actual supply. Bitcoin is not getting scarcer over time.
Regarding Short Term Interest Rates
Many readers said the market, not the Fed, sets interest rates.
If that was true, then the Fed would be irrelevant and could not wreak the havoc that it has.
I discussed this paradox at length several times previously. But let’s go back to my original post.
The Fed Uncertainty Principle
Please consider The Fed Uncertainty Principle written April 3, 2008 before the collapse of Lehman Brothers and Bear Stearns.
Does the Fed Follows the Market?
Most think the Fed follows market expectations.
However, this creates what would appear at first glance to be a major paradox: If the Fed is simply following market expectations, can the Fed be to blame for the consequences? More pointedly, why isn’t the market to blame if the Fed is simply following market expectations?
This is a very interesting theoretical question. While it’s true the Fed typically only does what is expected, those expectations become distorted over time by observations of Fed actions.
If market participants expect the Fed to cut rates when economic stress occurs, they will take positions based on those expectations. These expectation cycles can be self-reinforcing.
The Observer Affects The Observed
The Fed, in conjunction with all the players watching the Fed, distorts the economic picture. I liken this to Heisenberg’s Uncertainty Principle where observation of a subatomic particle changes the ability to measure it accurately.
The Fed, by its very existence, alters the economic horizon. Compounding the problem are all the eyes on the Fed attempting to game the system.
A good example of this is the 1% Fed Funds Rate in 2003-2004. It is highly doubtful the market on its own accord would have reduced interest rates to 1% or held them there for long if it did.
What happened in 2002-2004 was an observer/participant feedback loop that continued even after the recession had ended. The Fed held rates rates too low too long. This spawned the biggest housing bubble in history. The Greenspan Fed compounded the problem by endorsing derivatives and ARMs at the worst possible moment.
In a free market it would be highly unlikely to get a yield curve that is as steep as the one in 2003 or as steep as it was just weeks ago when short term treasuries traded down to .21%.
The Fed has so distorted the economic picture by its very existence that it is fatally flawed logic to suggest the Fed is simply following the market therefore the market is to blame. There would not be a Fed in a free market, and by implication there would be no observer/participant feedback loop.
In my post, I provided four key corollaries with discussion. Here is a short synopsis condensed from the full post.
Fed Uncertainty Principle: The fed, by its very existence, has completely distorted the market via self-reinforcing observer/participant feedback loops. Thus, it is fatally flawed logic to suggest the Fed is simply following the market, therefore the market is to blame for the Fed’s actions. There would not be a Fed in a free market, and by implication, there would not be observer/participant feedback loops either.
Corollary Number One: The Fed has no idea where interest rates should be. Only a free market does. The Fed will be disingenuous about what it knows (nothing of use) and doesn’t know (much more than it wants to admit), particularly in times of economic stress.
Corollary Number Two: The government/quasi-government body most responsible for creating this mess (the Fed), will attempt a big power grab, purportedly to fix whatever problems it creates. The bigger the mess it creates, the more power it will attempt to grab. Over time this leads to dangerously concentrated power into the hands of those who have already proven they do not know what they are doing.
Corollary Number Three: Don’t expect the Fed to learn from past mistakes. Instead, expect the Fed to repeat them with bigger and bigger doses of exactly what created the initial problem.
Corollary Number Four: The Fed simply does not care whether its actions are illegal or not. The Fed is operating under the principle that it’s easier to get forgiveness than permission. And forgiveness is just another means to the desired power grab it is seeking.
The Fed Uncertainty Principle is still my all-time favorite post.
Asinine Proposition on Low Inflation
Please recall this Asinine Fed Proposition on Inflation by Rudy Havenstein: “It would take a decade of above 2.5 percent inflation to make up for 5 years of shortfall“
Former Fed Chair Janet Yellen said her only regret was “low inflation”
As you can see by that excellent composition, Fedthink on too low inflation was widely believed and practiced.
The Fed wanted more inflation, got it in spades, and never apologized for its role.
Fed Studies Debunk the Phillips Curve
- Fed Study Shows Phillips Curve Is Useless
- Yet Another Fed Study Concludes Phillips Curve is Nonsense.
Both studies were done by Fed research staffers.
Yet, Fed Chairs Janet Yellen and Jerome Powell did not believe the Fed’s own studies.
in March of 2017, then Fed Chair Janet Yellen commented the “Phillips Curve is Alive“.
A Fed Economist Concludes the Widely Believed Inflations Expectations Theory is Nonsense
On October 21, 2021 I commented A Fed Economist Concludes the Widely Believed Inflations Expectations Theory is Nonsense.
The research department had these two amusing quotes in its report.
- It is far, far better and much safer to have a firm anchor in nonsense than to put out on the troubled seas of thought. John Kenneth Galbraith (1958).
- Few things are harder to put up with than the annoyance of a good example. Mark Twain, The Tragedy of Pudd’nhead Wilson (1894)
May 2, 2024: Home Prices Hit New Record High, Don’t Worry, It’s Not Inflation
The Case-Shiller national home price index hit a new high in February. That’s the latest data. Economists don’t count this as inflation.
December 24, 2024: Dear Fed, Please Shut Up Already, Stop the Forward Guidance
Danielle DiMartino Booth claims the Fed should be cutting more, not less. I have a different suggestion.
Since the Fed has no idea, it should stop forward guidance that the market front runs thereby amplifying the feedback looks discussed above.
More accurately, there should not be a Fed at all. It’s proven clueless.
May 1, 2023: The Fed Admits a Mistake in Collapse of SVB, Seeks More Power Anyway
If I am not mistaken, that is a perfect example of Fed Uncertainty Corollary Number 2, Number 3, and Number 4.
Gold Hits New Record High, Dear Jerome Powell, Is Everything Under Control?
This post was triggered by reader responses to Gold Hits New Record High, Dear Jerome Powell, Is Everything Under Control?
Gold does not believe the Fed has things under control and neither do I.
Today’s Pertinent Conclusion
We are trapped in “Fedthink”, especially the nonsensical proposition that two percent inflation is a good thing despite the fact that the Fed is clueless on how to measure inflation in the first place.
Fed buys and sell bonds, yet it creates conditions that affect whether or not people buy stocks or bonds. Isn’t that a fundamental conflict of interests? Forget about 2003-2004, Greenspan crashed the economy in 2000 because he claimed it was overheated and was paying off the national debt too fast…..yet he was the guy who said balancing the budget was needed to drive DOWN interest rates. Nobody had any clue what the Fed does or why, and the Fed makes up its own rules. Reagan’s tax reform was not given any time to work because Greenspan was in a big hurry to get inflation below 2%……but not only that— the deficif was shrinking and Reagan had a counter-cyclical Social Security tax increase in the pipeline that made the Greenspan 1990 recession worse in the short run, when in fact, thag tax increase would have balanced the budget in HW Bush’s first term if Greenspan had just waited to let the new tax reform work for a few years then the SS tax increase work to balance the budget and negate any need for big rate hike. The Fed’s actions has a huge effect on politics and fiscal policy. It created a blue wave in 1992, then a red wave in 1994. …hurt Reagan badly in 1982.
Mish, bitcoin is scarce right now. There can only be 21 million bitcoins, and there are only 1 million left to be mined. The only question is does it keep being valued as a form a scarcity worth paying for, not whether it is scarce. I do not own a single bitcoin. But, in theory, as long as enough people keep valuing it at higher and higher levels, it will remain a store of value, maybe even more so than gold. As with any item that is scarce, it just requires enough people to keep driving the price higher over and above inflation, like art, or baseball cards, etc.
Very nice illustration Mish.
The Fed does know what it’s doing. Just not in the domain monetary conservatives desire. Look at their successes.
1) The Fed has convinced the public that a group of unelected, unknown individuals can replace the complexity of free market dynamics, with its preposterous dual mandate. In the same way progressives have been persuaded that government can control climate.
2) The Fed has extended their influence into high level public sectors, eliminating checks and balance. A revolving door through the liberal Brookings Institute. Yellen has announced she is returning to Brookings (for debriefing). The separation between the Treasury and Fed since the 1951 Accord doesn’t exist.
3) The Fed has made financial markets completely dependent on their policy decisions. A majority of financial managers have never experienced a market without Fed intervention.
4) The Fed used PR to convince progressives the Fed is not part of the ultra wealthy oligarchy. Even though their policies are designed to bailout wealthy money brokers with inflationary fiat. An young host on NPR’s ‘Money Matters’ referred to Powell as reminiscent of a kindly older uncle.
Mish, The Fed purchases Treasury securities from the U.S. Treasury with book-entry credit. Treasury pays bills with the credit and, when the checks are cashed, the supplier gets Federal Reserve Notes that are printed by the US mint. Inflation has been added to the market.
I leave it to you to trace what the Fed does with the security they have received.
The Fed pays the mint the cost of production/printing. That is about 3 cents for a Washington and 18-30 cents per bennie. The Fed sells them to commercial banks at face value.
DOGE should fire most of useless staffs at Fed and limit the role to stable money supply.
The FED Uncertainty Principle is basically your doctoral thesis Mish. I would also add your 8-point refutation of replacement of the USD as the reserve currency by the Yuan. Your finest logic moments and excellent contributions to the field of economics.
Mish, you could also have mentioned the Fed unfounded fear of deflation and your take on that subject from your in your post : https://mishtalk.com/economics/the-core-cpi-declines-3-months-for-the-first-time-ever/
Thanks
I certainly stand by what I said in 2020 and many time before and after
“The Fed Uncertainty Principle is still my all-time favorite post.” Mine too. I saved it in my archives file. Thanks again Mish.
President of Canada’s Automotive Parts Manufacturers’ Association: “The auto sector is going to shut down within a week.”
Stocks pare losses as fearmongering on tariffs from MSM and Rep. Jeffries proves to be wrong.
https://www.washingtontimes.com/news/2025/feb/3/sen-chuck-grassley-seeks-fertilizer-exemption-tari/
Sen. Charles E. Grassley, Iowa Republican, urged Mr. Trump on Monday to look at exempting potash, or potassium-rich minerals that are critical components of fertilizer.
Mr. Grassley, writing on X, said farmers are reeling from high fertilizer prices due to “Biden inflation” so they cannot bear more pressure.
Sorry Chuck – your state needs to suffer to MAGA.
Don’t be hyperbolic. The whole state won’t suffer… just those with a net worth under 100 million.
Kiss your corn flakes goodbye…..
GMO poison flakes.
Federal Reserve – Afuera!
Breaking News: Trump now saying no one is out of tariffs. Here we go again, it’s deja vu.
Put your left foot in
Put your left foot out
You do the Hokey Pokey
and you shake it all about
Sing it with me!
Incompetent? This is by design, and has made me really rich.
we have an incompetent fed incompetent president incompetent workforce musk said that so stop your whining …..wait incompetent AI the Chinese said and did prove it so enjoy the s hite show.
So then the natural conclusion is that what we are actually dealing with is a Fed whose real goal is simply to facilitate and ensure it’s own existence. Explains why it employs so many economists. Please send DOGE to the Fed.
BOOM! That was quick.
Mexico bends the knee. Has agreed to supply 10K soldiers on the border to stop the flow of fentanyl and illegal aliens.
Was that Sheinbaum’s plan A, B or C?
Is this another trade war that can’t be won? If this is losing, then we need a lot more of it.
Very smart to bend quickly when you know you are ultimately going to bend anyway.
Trudeau up next this afternoon when he’s due to call Trump.
If Cartels fire upon Mexican troops one phone call to Trump and US special forces get deployed on Mexico Land.
Was wondering how US military could be justifiably sent into Mexico.
Sheinbaum would have gotten assassinated without US backing her.
Under Biden even if she wanted to take action would not have been able.
Whole different world is being ushered in.
It is only two weeks and full cabinet not in place yet. Amazing what is getting accomplished.
Yes! More war! Chaching!
If one parent does not walk into their child’s room and finds said child alive rather then a corpse on that bed from drug overdose, that is a win for humanity.
May God bless and keep those souls who walk into line of fire. Doing the duty they swore an Oath to fulfill.
A thousand parents would gladly sacrifice their military children to save that one little guy… soooo touching.
I love the innumerate!
That was all we were asking for. This is what Pierre Poilievre just wrote:
“LET’S TAKE BACK CONTROL OF THE BORDER and SAVE trade
We must
1. Send Canadian Armed Forces troops, helicopters and surveillance assets to the border immediately.
2. Add at least 2,000 border officers and expand CBSA powers across the entire border, not just at crossing points.
3. Install high-powered scanners, border surveillance towers and truck-mounted drone systems to spot border incursions.
… and Mexico will pay for it?
You don’t know who Pierre Poilievre is. Do you think he is Mexican or something?
Is he going to pay for it?
Mexico is paying for policing their own border going forward. They will also continue to pay for the wall once construction starts again.
Just like last time?
And just what will they be accomplishing there?
In view of the proportions of whatever problem there is, I suggest adding a detachment of Canadian border patrol to help their American colleagues.
Boom – That was quick – Trump backed down
Trump backed down with Mexico because Texans were going to be on the hook for $46b in tariffs/taxes. No one talking about that here. Other states that rely on Mexico for trade had similar amounts.
This doesn’t even include all the lost business.
People here cheering Mexico supplying 10,000 troops as if that will fix or stop illegal immigration or drug flow. It’s a 2000 mile border. So 5 troops per mile? Lol. Probably half of those troops or more are on the cartel payroll. They’ll all get raises.
I expect the tariff to be “back on” in 30 days.
Lol
We’re playing 19 dimensional chess here… the answer shall be revealed in time.
Lol
He is kind of losing it.
“The Greenspan Fed compounded the problem by endorsing derivatives and ARMs at the worst possible moment.”
The best possible moment to promote a housing bubble, though. That was ulterior intent. A bubble to replace a deflated bubble.
– Is the Fed playing politics? Does the Fed know what it’s doing at all?
> I definitely don’t think that they know what they are doing. Well Powell certainly didn’t, and neither did Greenspan or the Muppet. The 2 before him were totally useless, as He was…
>> As far as playing Politics, isn’t that the only answer available, at this point? The calls tend to go with the party in power, for the most part. They have consistently achieved absolutely nothing, that would not happened on its own. Perhaps with less involvement however, it may have and probably would have, but we can never know…
It looks like “Its Time” to “End The Fed”
Have been thinking along your lines.
How to change the group think Fed which has caused many problems.
So who has benefited from Fed policy? That answer appears to be growth of Bureaucratic State.
Trump is in process of bringing that to heel.
For example,DOGE has outed one of the charlatan organization US Aid. Now it has gotten put back under State Department supervision. Ostensibly to make it work in alignment with US Foreign policy objectives rather then off on a Marxist tangent counter to US best interests. Trump one, Globalists nothing.
Treasury Secretary Bessent I would believe is going to play a part in getting Fed aligned with US National interests instead of Bureaucratic State aligned with Globalists.
How that gets done? Maybe role as advisor by Ron Paul would be interesting move.
Mexico response to Trump Tariff shows Trump has a workable strategy in place.
One win begets another and there are many Fires to put out left behind by Biden.
Trudeau phone call with Trump at 3 pm. Market already anticipating something positive. Cad has been big mover in currencies today
Change Group Think by eliminating the Fed.
Ron Paul is good anywhere in Government IMO.
Trump rarely makes moves without an outcome in reach or achievable.
“They have all agreed to the same Government/FED Narratives. And you do not get into the group unless you AGREE to SAY the same things…over and over again and the assumption is that the American Public will believe the repeated phrases.”
CIA ‘Operation Mockingbird’ Media System.
What is a Mockingbird Known For? – Series of Phrases That Are Repeated Two to Six Times.!
“Trump’s ideas, even cryptocurrencies, are all based on antiquated theories that expired long ago. Trump’s advisers have decided to impose drastic tariffs,
thinking this will somehow Make America Great Again, but they are just wrong. It will shrink the US economy and send the rest of the world into recession.
In the end, America will decline, which is all part of our computer’s forecast for 2032.” (Got your gold in hand yet?Costco still selling it.)
https://www.armstrongeconomics.com/armstrongeconomics101/economics/trumps-tariffs-demise-of-the-dollar/?
Breaking , Mexico agrees, moves troops to border to stop fentany. Border crossings down 94 percent this proves the government could have stopped it whenever they wanted and was nothing but a US sponsored event . Venezueala agrees to take back their illegals . Panama scraps deal with chinese . Peace deal in Gaza . Columbia to fly illegals back to columbia . Sounds good to me ! Hundreds of thousand have died from fentanyl it should be a priority not to mention all the human trafficking in the Illegal immigration scheme as well as rape and untold abuse that has occured . Canada will caving is next up.
Trudeau is useless and on His way out! Canada’s People will be very happy to have “Some Of” their Freedoms back! It will take many baby steps, before they can walk tall, and someday RUN!!! The Rot has gotten pretty bad over the past decades.
Mexico already is capitulating by striking a 30-day tariff pause deal.
Mexico will send 10K national guard troops to the border to crack down on fentanyl.
https://nypost.com/2025/02/03/us-news/mexicos-president-announces-deal-with-trump-to-pause-tariffs-for-a-month/
BOOM! That was quick
Your take on the Fed and articles discussing them are the very cornerstone of your entire blog. Fedspeak is a good moniker to encapsulate how they operate within their Uncertainty Principle.
I just wanna take bets each meeting as to which, if any, the lone dissenter will be, as if they draw straws on who has to dissent for appearance.
Their biggest condemnation would be that if they were a raging success we wouldn’t have had these boom/bust cycles nor this recent crackup inflation which has caused severe disruption. Clearly they didn’t follow the data when insane fiscal policy met insane economic response to the plandemic. You say it best when you say they do whateverthehell they want…mostly because they are enriching themselves and protecting the institutions they serve–>the banks.
Breaking News: Tariffs on Mexico delayed 30 days.
Yup, I bought this morning’s dip bigly. It must suck for anybody who’s short SPY. Oh wait…
Lol, don’t worry, Trump will throw a tantrum at some point and it’s deja vu all over again. Besides, no business can actually plan any investment strategy with this type of volatility and that will hurt earnings.
From a post on Friday:
Mish- “I suspect Trump may find a way to “postpone” these tariffs following pledges by Canada and Mexico to do better on the border.”
Yours Truly- “No doubt. The buildup this week leading to the reveal on a Saturday? Politics is entertainment, even moreso with the current administration.”
For some reason the algos downvoted my post, yet it has come to pass. The public gets whipped into a frenzy for nothing. It’s almost like campaign season has never ended.
For those who claim the tariff threat is getting results, private negotiations would have had the same effect without the collateral damage of consumer retaliation and ill will. Again, politics is largely entertainment these days even moreso with the current president.
The one thing that has changed is no country on earth can trust that Trump will keep his word. That’s a huge problem for businesses, especially ones contemplating making multi-million or billion dollar investment decisions.
I didn’t think there was trust in him prior to this week, at least not based on media reports. Confidence to handle global affairs isn’t particularly high either-
https://www.pewresearch.org/global/2024/06/11/confidence-in-donald-trump/
Lol. You mean, “Breaking News: Mexico capitulates”
Now this is an article I can get behind.
The Fed exists to protect the wealthy.
They’re a bunch of bankers for crying out loud.
I don’t really have a problem with the Fed, but there needs to be an independent group that’s reviewing their data / findings. And, I do think there needs to be a WH economic advisor who sits on the FMOC as a voting member as well as someone from the independent review group like the GAO & OMB.
My main complaint with the Fed is their unwillingness to really explain to the American people in no uncertain terms that our fiscal spending is out of control. They’re the bank of the USA, so they should be able to say NO in some form or fashion to Congress. Maybe that’s pie in the sky thinking, but Powell knows where all of this is headed.
“The Fed exists to protect the wealthy.”
Almost. The Fed protects the member banks.
The Fedspeak may be rife with nonsense and groupthink, but the actions of the Fed can’t be mostly or completely incompetent otherwise their owners (i.e. member banks) wouldn’t be coming out ahead nearly every time.
This is a point where I disagree with Mish. The Fed doesn’t help the general public, but they have a very good performance record for their owners which I can’t fathom happening in spite of incompetence.
It pays to know when things are happening?
It pays better to know before they happen!
“Mish: Platinum is nearly 100% an industrial commodity and has to compete with palladium. Also the primary industrial use is in catalytic converters of which there is no need in EVs. Gold’s primary use is as a monetary metal.”
But isn’t this just arbitrarily picking the element gold as a monetary metal in the same manner that people are pushing to pick bitcoin as the monetary digital coin?
And yes, I realize gold as a 5000 year history etc. But essentially it’s the same thing once the price of gold is no longer tied to scarcity relative to other metals (platinum/silver etc).
Note that this was not the case back when we had a gold standard (in 1970 Gold was 35, Platinum was 166). So the gold price itself has been distorted relative to scarcity by going off the gold standard.
Arbitrary?
Gold was money for thousands of years and Central Banks still have gold – many adding
Nice article.
About Trump, could it be thought the system will eventually crash and burn and Trump is the match that ignites the process more quickly than would happen otherwise?
It blows my mind the stupidity on both sides and most people are caught in the middle.
Mish, I do wonder why you don’t see the same correlation with the COVID vax? Endless injections. And then there is remdesivir where it may help save you to die from kidney failure.
Sounds like the Fed
“They have all been trained to be ignorant. And you do not get into the group unless you believe the same things.”
I would correct this statement in this way, Mish and Readers:
They have all agreed to the same Government/FED Narratives. And you do not get into the group unless you AGREE to SAY the same things…over and over again and the assumption is that the American Public will believe the repeated phrases.
Here is my perceived consensus with other thinking Americans:
NO ONE BELIEVES the FED or the BLS or any other agency because we know that they are directed by Government Politicians and their needs – – not ours!
The amazing thing is you can take what you wrote and substitute the word “Fed” for “Trump” and it remains true.
Well said!
I agree.
When they’re doing surveys to ask me what I can rent my home for, I know the numbers are meaningless compared to actual data from home sales. And I’m sure there are other obvious issues as well. For example, the hedonic adjustment of CPI is probably overstated.
Since the late 70’s & especially the changes made in 1983, the BLS is intentionally underreporting CPI for the sake of holding down SS growth. Now considering our massive debt 42 years later, there are good & bad reasons for this. But at least be honest about it.
“The Wizard of Oz” best explains the FED and USD. People believe what they are told. Only when people are separated from the group, as Dorothy was, that the truth presented can change people’s beliefs. People value the psychological comfort / physical safety of being accepted in a group over the truth.
In my 20’s, I was vulnerable to the FED SPEAK and POLITICAL NARRATIVES and in my 50’s I woke up to the fact that they were all lying.
It’s even more basic. The FED is religion.
USAID – Afuera!
Kicking the reader–You wouldn’t have any readers if everyone were as bright as you.
I’ll complete it for you – you left off “… think you are” at the end of your bolded sentence..
Let’s see whether Manicula (=little hands) gets cold feet on his tariff craze by the end of today.
Manicula already got cold feet. Mexico is sending 10,000 troops to the border to cut Mexico’s bilateral trade surplus with the U.S; MAGA thinks Mexico has capitulated. 😊
Think again, but critically. Trump is playing with you. Sowing confusion is his mode of operation. M
The Young, Inexperienced Engineers Aiding Elon Musk’s Government TakeoverEngineers between 19 and 24, most linked to Musk’s companies, are playing a key role as he seizes control of federal infrastructure. https://www.wired.com/story/elon-musk-government-young-engineers/
Young, dumb and worshipful. They would light themselves on fire for me.
Excellent post Mish. Might I suggest you can extend your corollaries to Trump. I am coining the term TrumpThink.
Here’s an example:
Trump Uncertainty Principle: Trump, by his very nature, has completely distorted the market via self-induced delusions of central planning grandeur and tariffs. Thus, it is fatally flawed logic to suggest Trump knows what he is doing, therefore the market is to blame for Trump’s actions. There would not be a Trump in a free market economy, and by implication, there would not tariff feedback loops either.
I’ll let you work on the rest 😉
Well, it is ALL POLITICS-THINK, right?
True, there is Party-think for each respective party.
Post-Bush/Cheney Patriot Act + Post-Obama/Biden
NDAA = UniParty Warmongers.
Are you having a stroke sir? Should I call someone?
Good stuff as usual!
The FED is doing exactly as it shareholders desire. The purpose of the FED is to bail out the big banks (shareholders) by using the tax payers dollars when needed. All this other stuff is dogma to screen its major purpose. That’s why it doesn’t make much sense and it appears they do not know what they are doing while they have been almost 100% effective in their mission.
When gold breached $600 the jewelry industry was subjected to systemic change. Production shifted from 14K/18K to 10K before silver. The gold Jewelry is dead, ex with large diamonds, or diamonds mounted on platinum pcs. King George is doing well. Traders who failed to sell in 1980 lost their money. It was repeated in 2011 and will be repeated again.
Talking heads on CNBC all saying S&P going to 4000 this year. Got SPY PUTS?
Option, SPX : after testing 5,500 ==> up to 6,300/6,600, before plunging later this year < 2022 high, to build IWM Accumulating zone. Rotation to small and mid cap co, high tech satellites co that will serve 16 categories of must have industries, financed by the regional banks. There are other options.
Listen to the screaming guy!
The notion that social or policy elites are duplicitous, putting out false rationales for public opinion, while secretly adhering to more sophisticated and grounded schemes, is deluded. These people are chosen precisely for their demonstrated ability to stick to the official rationale, and all ego rewards they crave are connected to this strategy, which also serves to discipline everybody with the ranks.
Most policy elites get their explanations and narratives from the MSM, and are not operating in terms of better knowledge. Intel organizations exist mainly to spread chaos and disinformation, especially to the media, and insofar as there are other motives at odds with these aims, they are self-serving schemes to railroad policy elites into scenario’s they prefer.
Trade takes place when two parties are both convinced there is a win/win deal.
Anybody who thinks that (trade) WAR is more advantageous than voluntary cooperation needs to have their head checked.
People that make weapons always find war advantageous, and we make more weapons than anybody. Are you trying to put the good people of America out of work?
Gold jewelry does not consume gold, nor does it take gold out of the gold market.
In many countries people use gold to launder money or escape capital gains, putting off the day of reckoning, as a surety for when they need it or have less income to be taxed, whatever.
In countries where jewelry is used for dowries and other such purposes, the gold is being used to hoard & preserve capital within the family.
In most cases, the gold functions very much the same way as central banks or other parties who are storing it in vaults.
With two madmen now in power in Washington, we will soon all be glad to have the Fed adults in the room, whatever the shortcomings of their policy framework.
You can lead a horse to a juggernaut economy but you can’t make the horse drink the prosperity. Sometimes you just end up with donkeys.
We just finished 4 years of donkeys in power 🙂
Let’s see how your investment portfolio fares over the next 4 years. Get back to me then. Same for your job/business/wealth/property value/etc.
You’ll be begging for the donkeys soon enough. You may have to send money to your Canadian fam too. Ouch, double whammy.
Lucky that the money I might have to send to Canada is worth about 1.40 per dollar. Means I have to send less to get the same!
Canadian dollar already down more than 1 cent (almost 1.5%). A few more cents and the tariffs will pay for themselves at 10% (where it likely ends up).
Canadian dollar is the new Zimbabwe dollar. Can’t wait to see 1 trillion dollar Canadian note.
The law of unintended consequences.
Ironically Trumps tariffs and his insistence on all countries use the US dollar will actually backfire and undermine the dollar.
Got gold, oh yeah you dodnt, remember in 2019 in our discussion on gold. You insisted anyone who owned gold was an idiot. Meanwhile gold hits high in all currencies and Trumps policies likely to exacerbate the dollars woes over the long term.
This truly is the golden age as you and Trump like to say.
Fifty Years of Foreign Exchange Chaos Could Be Coming to an End.
I actually own some gold but small amounts so don’t know what you’re talking about but you’re the guy that has a few screws loose anyway.
If I recall, you’re in Canada too, you’re going to need that gold to pay 25% more for food.
“If I recall, you’re in Canada too, you’re going to need that gold to pay 25% more for food.”
With Trumps tariffs, everyone can expect to pay more for food. Not only will energy get more expensive but fertilizers such as potash are now more expensive for American farmers.
American farmers can expect to have substantially higher input costs.
Potash: Tariffs on Canadian Imports Likely to Be… | Morningstar
Potash: Tariffs on Canadian Imports Likely to Be Paid by US Farmers, Leaving Producers Unaffected
Mish, you really need a history update on this board. Realist now claims to own gold.
“pay 25% more for food”
Unlike in the USA – Where Almost Everything Has ‘Doubled’ Since The ‘Plandemic’
Housing, Rent, Insurance, Property Taxes, Health Care, Groceries, Gasoline, Diesel, Vehicles, Utilities, Wood/Building Supplies, Etc.!
Core Inflation – Excludes ‘Volatile’ Food & Energy Prices.!
Picturing Queen Charles
“Canadian dollar is the new Zimbabwe dollar. Can’t wait to see 1 trillion dollar Canadian note.”
Anyone with any knowledge, has gold. (I know you have none).
Anyone with American, Canadian, British, Euro, etc. will see the purchasing power of their respective currencies decline. Odd you decry the inflation to come to balloon under Trumps policies and cant put 2 and 2 together.
All currencies eventually go to zero. The dollar is on its way to joining the zimbabwe club, trust me.
U.S. National Debt Clock : Real Time
Now at 90 percent gold and miners, plus silver for the plebians. 10 percent cash and one month CDs, plus some stock retained as capital losses.
I remain convinced of a global crash to more than 80 percent losses. Assets are in three countries at present as an added safety measure
Just A question Tim, where do you see the dollar longer term, say in 5, 10, 15 years?
Just in 4 years, the US debt is projected to rise to $47 trillion. We know that many of the participants in the dollar index are likely to decline substantially and maybe even disappear in the future. The Euro is what 57% and they are likely to experience negative growth each year going forward.
This debt clock is in 2029.
U.S. National Debt Clock 2029
When you ask where I see the dollar, what do you mean? As in relative to what (Canadian dollar, Euro, Gold etc)?
The dollar is not going anywhere in terms of reserve currency in 5, 10 or 15 years.
Indeed. Now it’s the Pig’s turn.
Another big tariff-hit category is building materials, such as Canadian lumber.New home sales are already showing signs of price pressure, as Wolf Richter discussed in the past week: Inventory of New Completed Single-Family Houses for Sale Spikes to Highest since 2007. Builders Prop Up Sales with Lower Prices, Bigger Incentives, Smaller Houses.https://wolfstreet.com/2025/01/27/inventory-of-new-completed-single-family-houses-for-sale-spikes-to-highest-since-2007-builders-prop-up-sales-with-lower-prices-bigger-incentives-smaller-houses/
Have you heard that new home sales are now stalling (already built)?