Rene Magritte’s 1929 painting “The Treachery of Images,” depicts a tobacco pipe with a caption that reads “Ceci n’est pas une pipe,” (French for “This is not a pipe”). Everyone who has taken a course in modern art knows that Magritte’s exercise in contradiction was meant to draw a distinction between a real thing and a representation of that thing. Perhaps we should send Federal Reserve Chairman Jerome Powell a beret and an easel as he is attempting a similarly surrealistic take on monetary policy.
The Federal Reserve is set to begin what a MarketWatch article called a “massive” bond-buying program.
Jerome Powell announced the program last Tuesday and the central bank released more details about the plan on Friday. The Federal Reserve will buy $60 billion in short-term Treasury bills each month. According to a statement, the purchases will continue, “at least into the second quarter of next year.” That would amount to around $400 billion worth of Treasurys added to the Fed’s balance sheet.
When I was a kid, we used to play the opposite game. Everything you said had to be the opposite of what you meant. For example, if you were hungry, you’d say, “I’m not hungry.” Or if you really liked the song on the radio, you’d say, “This song sucks.”
Well, politicians play the opposite game pretty much all the time.
Everybody is talking about the possibility of a trade deal.
Well, maybe not everybody. In this episode of the Friday Gold Wrap, host Mike Maharrey rehashes his standard trade war observations and then moves on to bigger news – Jerome Powell’s announcement that the Fed is resuming QE. Of course, Powell didn’t exactly say that. In fact, he tried to say the opposite in a statement that Mike describes as “word salad.” In this episode, Mike breaks down what’s going on with the Fed and why it matters a lot more than the possibility of a trade deal. He also covers some important gold-specific news that came out this week.
Yesterday, Jerome Powell announced that the Fed will soon launch another round of quantitative easing. Except he insisted it will not be doing quantitative easing.
This is not QE. In no sense is this QE.”
What the Fed will be doing, according to Powell, is expanding its balance sheet. Powell said details of the process will be explained in the following days, but it will involve the purchase of Treasurys.
This sounds an awful lot like QE, as Peter Schiff emphasized in his podcast.
Central bankers suffer from what some might call fatal conceit. They actually believe that if they tinker enough, they can come up with a policy that will work “just right.” Maybe we should call it the Goldilocks Syndrome.
But the truth is they don’t know.
It was Fed week. As widely expected, the central bank cut interest rates another 25 basis points on Wednesday. But the real Fed action happened on Tuesday morning and most people didn’t even notice.
In this episode of the Friday Gold Wrap, host Mike Maharrey talks about all of the Fed mechanizations – not just the rate cut – and what it all could mean.
The Federal Reserve did exactly what the markets expected on Wednesday, cutting interest rates by another 25 basis points.
The central bank sent out mixed signals about what will happen next. Markets widely construed the Fed’s messaging as somewhat hawkish. In its policy statement, the Fed said the US economy is growing at a “moderate” rate and the labor market “remains strong. It cut rates, “in light of the implications of global developments for the economic outlook as well as muted inflation pressures.”
In his podcast, Peter Schiff reiterated this was just another step toward zero and said whatever the Fed wants to call its mechanizations, they’re going to stink to high heaven.
Donald Trump has been badgering Federal Reserve Chairman Jerome Powell for months, begging for lower interest rates. Yesterday, he took things to another level, saying that the “boneheads” at the Fed need to push rates into negative territory.
In his podcast, Peter Schiff said negative interest rates are boneheaded.
Donald Trump went on a Twitter rant Friday. In his latest podcast, Peter Schiff said the president basically “lost it.”
There was a lot of news on Friday before Trump went off on Twitter. Jerome Powell gave his speech at Jackson Hole. He was generally upbeat about the economy. Then China announced additional tariffs on $75 billion in American imports. But the real fireworks started with Trump’s tweets in response to the Chines tariff retaliation.