Mester Comments
“We’re going to be accommodative for a very long time because the economy just needs it to get back on its feet,” Mester said during a virtual discussion organized by the Toledo Rotary Club.
Mester said shThee supports Treasury Secretary Janet Yellen’s efforts to work with regulators to make sure that investors are being protected.
“We want them to make sure the game being played is a fair game,” Mester said, adding that the U.S. central bank would continue to monitor for signs of excess in financial markets.
The above via Reuters.
Fed Groupthink
Mester is part of the groupthink culture at the Fed that does not know what inflation is.
Moreover, every person on the Fed is either an economic dunce who cannot spot bubbles or a bold-faced liars about what they are doing. I suspect a healthy dose of both.
The Fed will “continue to monitor for signs of excess in financial markets,” just like they did in 1998, 1999, 2000, 2005, 2006, 2007, 2008, and of course now.
They will continue their vigilant monitoring up until the next crash.
National Debt
National debt is approaching $28 trillion. I snipped that image from US Debt Clock. If you haven’t been to the site, please check it out. It is debt in real time, updated every second.
Three percent of $28 trillion is $810,000,000,000 ($810 billion).
If the interest rate was 3%, that is the amount of money the government would have to collect annually just to pay interest from now until eternity unless progress was also made on paying down principle.
Inflation and Speculation are Rampant
Inflation as measured by soaring credit, stock market bubbles, the bubbles in junk bonds and housing is through the roof.
The Fed either does not see it or prefers to ignore it and is being disingenuous about it.
Either way it’s a problem.
Inflation: How Should We Measure It?
The Fed brushes all this aside by pointing at the CPI. I have news for the Fed, the low CPI is a mirage.
It’s not the only measure of inflation that matters.
For discussion, please see Inflation: How Should We Measure It?
There Are No Temporary Measures, Just Permanent Lies
On April 20, 2020 I declared There Are No Temporary Measures, Just Permanent Lies.
Fed Chair Jerome Powell stated the blatantly illegal junk bond buying measures it was taking were “temporary”.
What a hoot.
Just like the Fed’s announcement that its previous balance sheet expansion was “temporary”.
The Fed had 10 years to unwind its balance sheet after the last crisis, but never did. Now we have new balance sheet records every week.
There are no temporary measures, just permanent lies.
Very Long Time or Forever?
When the Fed says “accommodative for a very long time” they may as well be honest. They mean forever (or some sort of global currency crisis along the way to forever).
My bet is a currency crisis comes first.
Mish
Loretta Mester is an anagram of T-rate Molester
At what point does the public lose all confidence in government?
“make sure investors are protected” ….. What about a large segment of the population who can’t afford to make “investments”? Many can barely afford to buy enough food, let alone protect or hedge against inflation. I understand Pareto’s theorem, but that’s not much comfort to all my friends in my neighborhood making
$8 per hour.
The bottom 50% of earners have no traction, their designated place is to run on the work treadmill until they get sick or die, while many others “make” money without being the slightest bit productive. Thus the rise of populism, YOLO speculation, and the movement toward UBI.
There’s nothing the Fed can do until business investment in dollar terms picks up in a huge way. The problem is there is no real profitable demand for money. So interest rates are going to be low.
If the federal government were ‘in control’ and issuing its own currency instead of borrowing it into existence from a private entity, then there wouldn’t be a need to collect $810,000,000,000 in taxes to pay down the interest if the prevailing rate reached 3%.
large debt is a problem only if the software that does the accounting is unable to handle that many digits. otherwise, it’s just a number.
They will stay accommodative until they are forced otherwise.
forced by?
Is this zerohedge?
Nice to see my hometown Fed branch chime in, usually it’s the other branches making headlines with crazy statements.
Every Fed statement since 2008 could be summed up with the “nothing to see here!” Leslie Nielsen gif.
Off topic but you probably want to listen to this. It takes the first 5 minutes for the nutshell story and the details and proof takes another 35 minutes. The documentation is in there. link to youtube.com
Yup, I always trust a guy who works for a Russian trolling operation./s
Just look at his work history.
You shouldn’t be so easy to fool…it doesn’t make you look smart.
Anyone who has a claim of “dashboard of truth” should raise your “liar” antennae.
If congress engages in the right fiscal policy the Fed should take its foot off the gas. The yield makes no sense
Just a reminder we elected essentially the people that got us to the 27 trillion debt. You think they know any other way?
My guess is USD gets in one last hurrah when these vertical markets crash and people can’t get out of TSLA and BTC and everything else fast enough. Then immediately Fed and the rest of Washington will try to nuke-with-free-money their way out of the deflationary pit, creating global financial chaos. Physical commodities will be the place to be. What am I missing?
Farmland which Bill Gates bought.
US Debt only up a half billion since your screenshot 2 hours ago. I think we got this!
we sure do!
US Debt only up a half a billion since your screenshot 2 hours ago. I think we got this!
To stop the debt increase they have to raise taxes. You can’t raise taxes because the economy would crash even more. You can’t raise taxes on the extremely wealthy individuals and companies because the wealth is in tax havens and untouchable. Austerity is out unless you want to risk violent revolution so the only thing to do is keep on doing what they do and hope that something such as a Miracle happens. Mish, would you want them to raise taxes now or move to a gold standard? What would you like for them to do?
“You can’t raise taxes on the extremely wealthy individuals and companies because the wealth is in tax havens and untouchable.”
That money can still be taxed, the “real” problem is that money is “job creating”, and if it’s taxed it won’t create jobs…while sitting in tax exempt loopholes created by politicians who’s campaigns rely on those individuals “donations”.
That’s how “trickle down job creating tax cuts” work, it’s easy to see how effective it’s been by reviewing household debt vs inflation adjusted wages for the last forty years.
My 21yo son came yesterday and said he was all in on Ethereum. I mean, why not … he has zero living expenses and he’s working part-time and attending university.
Does that signal a top?
That signals that he probably has more money than you now if he has been the long the cryptos. You should ask him to pay rent or better yet ask him for investment advice.
More disposable income? Certainly. But the wife and I have a deal with the kids … free ride until degreed. I figure if he hits it big, he’ll take care of us in our old age.
Maybe they understand the New World better than we do. My sons-in-law and I talked crypto several years ago. They explained why they were in them and I didn’t understand then. I wish I had a more flexible mind then.
same here. many years ago i met a young guy at the bar playing with his google glasses. he was a ceo of a local seo company and he said he was buying bitcoin as fast as he could. the price then was around $100. i thought he was crazy. now i think i was crazy.
“Does that signal a top?”
No, I’m pretty sure it has to be your shoe-shine boy giving you stock tips.
Isn’t the real story…..that the Fed is willing to risk a currency crisis….the prevailing opinion being that it’s unlikely in the short term…in order to prevent a deflationary credit crisis?….Because we all know we don’t like those much.
The expectation for corporate bond defaults has been revised down, right? Because of easy money refinancing…
Equities look very frothy to me now…..in a way they didn’t a year ago. I predict a blow-off top followed by serious corrections……other assets to follow (gold might lead, as it sometimes does)…but generally a vicious loss of nominal wealth, followed by a recession and a credit crunch. Bailouts to follow for the banks and elites in financial services.
I prefer the inflation to continue….it is making me richer, after all….and when the music stops, I will have to make all kinds of adjustments……although at this point I feel pretty well hedged…..
The working stiffs will probably go all in on stocks with their $1400 checks….we have some time left.
how high do you think s&p goes before correcting? can it get to 5000 and then correct to 4000?
You just can’t call such things.
I do not own a single share of stock, and so I don’t even count the cycles for the S&P…..but I would guess that 5000-ish S&P might be a good guess. Could it go higher? Of course.
On the downside I’d expect much more pain than a fall from 5000 to 4000. Try 3000 for the first year and maybe a second leg after that. ….Going back to the 2000 crash, just for an example……..it was about 40% the first year and 20% additional in 2001 before it found a bottom.
It might not even be this year…..but if not this year then probably next year is what I think…..at this point. You would expect to see some topping behavior that will give some warning…..I haven’t seen ANY sign of that….but if this is the year, I’d expect to see it by summer.
Stock markets like to fall hard in October…. :). Typically you would see tops forming some months before that….like April or May….because of the coming helicopter money, that might mean it’s too late for all that to happen this year.
“a vicious loss of nominal wealth, followed by a recession and a credit crunch.”
Yes, except this time every white building on Constitution Avenue will immediately do its best to print and spray a gazillion dollars into “the economy.” They are very well practiced now: the Fed’s $trillions and Congress’s $1400 checks are all just warm up (and very popular too!) … they will go 10x or more the next time there is a serious crunch that hurts the 0.1%. And if they overdo it, then the currency will blow up. But since when does the Fed oversteer, right?
“The way to crush the bourgeoisie is to grind them between the millstones of taxation and inflation.”
― Vladimir Ilyich Lenin
Lenin wasn’t speaking specifically about the ultra-rich (owners of capital aka liquid assets) he was talking about the bourgeoisie aka the rent-seeking owners of fixed assets. The closest parallel today would be the managerial class along with owners of SME’s. His assessment was crudely correct but devastatingly brutal to most of the population. The ultra-rich weren’t taxed or inflated out of existence; they emigrated in a panic, or were summarily executed and/or imprisoned.