It looks like the Federal Reserve is about to get back into the bond business and help the US government deal with its massive debt.
The Treasury Department announced yesterday that it will not have to borrow as much money in the third quarter of fiscal 2019 as originally anticipated. But this is not because of a slowdown in government spending. According to a Treasury official cited by Reuters, the reason for the lower borrowing estimate is due to an anticipated increase in Fed Treasury holdings as the central bank ends its balance sheet reduction program.
Just a few weeks ago, the mainstream was worried about economic growth. Now, all of a sudden, the mainstream is bullish about economic growth. It seems like the high from the Fed’s monetary heroin has fully taken hold. And it’s not just in the US.
In this episode of the Friday Gold Wrap, host Mike Maharrey talks about how central bank monetary policy and government economic stimulus is impacting economies. It’s fun being high … until you’re dead. He also covers some interesting developments in the gold market.
Last November, Fed Chair Jerome Powell said interest rates were “just below the broad range of estimates of the level that would be neutral for the economy.” This was the excuse for the central bank’s monetary policy 180 and set the stage for the “Powell Pause.”
Central bankers are perpetually on a quest to find the elusive neutral interest rate, but in fact, it’s an impossible goal, as economist Frank Shostak explained in an article published on the Mises Wire.
Basically, the Fed is chasing unicorns.
How are all of these unprofitable companies staying afloat and even making big splashes with media-hyped IPOs?
Peter Schiff addressed this question, along with the supposed “failure” of capitalism in his most recent podcast.
The “Powell Pause” is not enough. President Donald Trump not only wants interest rates cuts; he wants to put quantitative easing back in play.
During an interview Friday, the president once again complained about the Fed’s 2018 interest rate increases, saying “they really slowed us down.” Trump wants stimulus and called on the Fed to resume Obama era QE.
In the March 8 episode of the SchiffGold Friday Gold Wrap podcast, Mike Maharrey emphasized the importance of understanding sound economic theory. And as economist Frank Shostak explained, facts and figures aren’t enough to digest what’s going on in the economy.
In order to really make sense of the data one must have a theory, which stands on its own feet, and did not originate from the data. By means of a theory, one could scrutinize the data and could then try to make sense out of it.”
In a recent article published on the Mises Wire, economist Dr. Thorsten Polleit builds on this body of knowledge, explaining how central bank manipulations of interest rates not only distort the economy, the actually mess with our minds.
During its FOMC meeting last week, the Federal Reserve took 2019 rate cuts completely off the table. It said it will freeze bond sales from its $3.8 trillion balance sheet later this autumn. In other words, balance sheet normalization is pretty much a done deal. Peter Schiff has predicted this would happen. He said from the beginning if and when the Fed tried to normalize rate, it would have to abort the process.
And here we are.
But as Peter explained in his most recent podcast, the Fed still isn’t being honest about why it’s done a monetary policy 180. It’s making excuses.
There’s that word again — patient.
Jerome Powell once again emphasized patience during the most recent FOMC meeting. The Federal Reserve left interest rates unchanged and took any hikes for 2019 off the table. It went a step further and projected just one rate hike in 2020.
During his most recent podcast, Peter Schiff said most people expected a dovish Fed, “But I don’t think they were expecting the Fed to be this dovish.”
Federal Reserve Chairman Jerome Powell appeared on 60 Minutes last Sunday to reassure us that the US economy is great. There’s nothing to worry about. So, why the sudden reversal in Fed monetary policy? According to Powell, the central bank is just worried about slowing global growth. But as Mike Maharrey discusses in this week’s Friday Gold Wrap, it’s pretty clear the real problems are right here in the good ol’ US of A. Mike also covers the latest in precious metals news, with a focus on silver.
All of a sudden, the Federal Reserve is considering increasing its balance sheet again.
Remember back in September? QE was on “autopilot.” Then we got the “Powell Pause” and suddenly, the talk was that balance sheet reduction could be winding down. Powell confirmed that was the case just a couple of weeks ago when he told a congressional panel the central bank would be in a position to “to stop runoff later this year.”
