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The
central banks have gone so far off the deep-end with financial price
manipulation that it is only a matter of time before some astute politician
comes after them with all barrels blasting. As a matter of fact, that appears
to be exactly what Donald Trump unloaded on bubble vision this morning:
By
keeping interest rates low, the Fed has created a “false stock market,”
Donald Trump argued in a wide-ranging CNBC interview, exclaiming that
Fed Chair Janet Yellen and central bank policymakers are very political, and
should be “ashamed”of what they’re doing to the country…
He’s completely correct. After all,
they are crushing real wages with their 2% inflation targeting; destroying
savers with NIRP and sub-zero rates, and burying unborn taxpayers in monumental
debts that today’s politicians are pleased to issue with reckless abandon
because the short-run carry cost is nil.
Interest on the Uncle Sam’s $19.4 trillion of
debt, for example, is easily $500 billion lower than its true economic cost
based on a normal yield after inflation and taxes and elimination of the phony
$100 billion per year in so-called Fed “profits” that are booked by the
treasury as negative interest expense.
Alas, when interest rates eventually
normalize, the Treasury’s debt service costs will soar by hundreds of
billions. At the same time, the entirety of the Fed’s “profits”, which are
conjured from thin air because it buys interest-yielding government and GSE
debt with printing press liabilities which cost virtually nothing, will
disappear. That’s because it will be forced to take reserve
charges for giant principal losses on the falling prices of its
$4.5 billion portfolios of government and GSE bonds.
At that moment, the long-abused citizens of
Flyover America, who have already been clobbered as savers and wage earners,
will get hit with the triple whammy of soaring
Federal tax bills. And this is not a matter of if or even when; it’s really
just a question of how soon.
(Full text at link below)
There is all the evidence
you need that the world’s financial markets are totally and completely rigged.
And that’s why Donald Trump was exactly on target this morning when he uncorked
another politically incorrect observation about the rigged nature of the Wall
Street casino.
To wit, Yellen is
still sitting on interest rates at the zero bound after 93 months for
one simple reason. Even in the context of an economic recovery
that is now allegedly so complete that we are actually on the cusp of full
employment, according to Vice-Chairman Stanley Fischer, she is deathly fearful
of a hissy fit on Wall Street, as was foreshadowed by last Friday’s
sharp sell-off.
Opined the Donald:
“She’s obviously
political and she is doing what [President Barack] Obama wants her to do,”
Trump said in an interview on CNBC. Trump predicted that the market is going to
“go way down” as soon as interest rates go up.
“I believe it is a false
market because money is essentially free,” Trump said.
He got that right but needs
to take it a step further. At the same time that the Fed continues
placating Wall Street gamblers with an unending stint of free carry trade
funding that has self-evidently not generated real breadwinners jobs or higher
real incomes in Flyover America, savers and retirees continue to be
pounded.
In fact, our unelected
monetary politburo is causing upwards of $300 billion per year to be
transferred from savers to the banks and the financial system owing
to its senseless pursuit of 2.00% inflation via pegging the money market
interest rate on the zero-bound.
Even then, however, the true
impact goes far beyond retirees and the modest share of the population
that actually attempts to save. To wit, 2% inflation targeting is absolutely
the stupidest thing any central bank could pursue in the context of a global
economy is which goods and services are freely traded, and in which
the US, Europe, and Japan have the highest nominal wage rates on the planet.
What inflation targeting
does is cause the domestic price level to rise, rather than fall, in DM
economies. It thereby also causes the nominal wage gap with China and its
EM supply chain to widen. So the Donald is right on that one, too.
Indeed, the most potent
agency of off-shoring American jobs is not the USTR or bad trade deals,
but the central banks. And in the middle and lower ranks of the wage
market—-where the China price on goods and the India price on services bears
down most heavily—-the Fed’s inflation folly is especially perverse.
As we have demonstrated with
our more accurate “Flyover CPI”, the cost of living faced by main
street America—especially for the four horsemen of food, energy, medical and
housing prices—has
risen by 3.1% annually since the late 1980s. And that is
well more than hourly wage gains for production workers.
So the Fed has
delivered to working class Americans the worst of both worlds. Namely,
rising nominal wages which have priced them out of the world market, but even
higher domestic inflation that has caused their real wages and living
standards to shrink.
Here is the smoking
gun. Notwithstanding a near tripling of the nominal wage rate from $9 per
hour in 1987 to about $22 per hour today, real wages are lower than they were
three decades ago.
(More charts and details at link below)
In short, the “something for nothing” money
printing policies inflicted on Flyover America by our unelected rulers at
the central banks, and with the full support of their facilitators and
supporters among the Wall Street/ Washington ruling elites, are not only
bad economics; they are perverse and unjust beyond measure.
Indeed, the Fed is waging an insensible
and outrageous war on savers, workers, and future taxpayers—even as it
pleasures the 1% with fantastic financial windfalls from the Wall Street
casino.
Now that is a rigged system. And that is a
beltway evil that merits Donald’s unrelenting attack on behalf of the
citizens of Flyover America who have been left behind in their tens of
millions.
Full text and charts at: https://www.lewrockwell.com/2016/09/david-stockman/homerun-donald/
