{"id":1302000,"date":"2023-05-29T06:10:47","date_gmt":"2023-05-29T10:10:47","guid":{"rendered":"https:\/\/bugaluu.com\/news\/facts-vs-fed-speak-a-comical-history-with-tragic-consequences\/1302000\/"},"modified":"2023-05-29T06:10:47","modified_gmt":"2023-05-29T10:10:47","slug":"facts-vs-fed-speak-a-comical-history-with-tragic-consequences","status":"publish","type":"post","link":"https:\/\/bugaluu.com\/news\/facts-vs-fed-speak-a-comical-history-with-tragic-consequences\/1302000\/","title":{"rendered":"Facts Vs. Fed-Speak: A Comical History With Tragic Consequences"},"content":{"rendered":"
\"\"<\/a><\/div>\n

Facts Vs. Fed-Speak: A Comical History With Tragic Consequences<\/span><\/p>\n

\n

Authored by Matthew Piepenburg via GoldSwitzerland.com,<\/em><\/a><\/p>\n

Below, we look at simple facts in the context of complex markets to underscore the dangerous direction of Fed-Speak and Fed policy.<\/p>\n

Keep It Simple, Stupid<\/strong><\/h2>\n

It\u2019s true that, \u201cthe Devil is in the details.\u201d<\/p>\n

Anyone familiar with Wall Street in general, or market math in particular, for example, can wax poetic on acronym jargon, Greek math symbols, sigma moves in bond yields, chart contango or derivative market lingo.<\/p>\n

Notwithstanding all those \u201cdetails,\u201d however, is a more fitting phrase for our times, namely: \u201cKeep it simple, stupid.\u201d<\/p>\n

The Simple and the Stupid<\/strong><\/h2>\n

The simple facts are clear to almost anyone who wishes to see them.<\/p>\n

With US debt, for example, at greater than 120% of its GDP, Uncle Sam has a problem.<\/p>\n

That is,\u00a0he\u2019s broke<\/strong><\/a>, and not just debt-ceiling broke, but I mean broke, broke.<\/p>\n

It\u2019s just THAT simple.<\/p>\n

Consequently, no one wants his IOUs, confirmed by the simple\/stupid fact that in 2014, foreign Central Banks stopped buying US Treasuries on net, something not seen in five decades.<\/p>\n

In short, the US, and its sacred bonds, just aren\u2019t what they used to be.<\/p>\n

To fill this gap, that creature from Jekyll Island otherwise known as the Federal Reserve, which is neither Federal nor a reserve, has to mouse-click money to pay the deficit spending of short-sighted and opportunistic administrations (left and right) year after year after year.<\/p>\n

Uncle Fed, along with its TBTF nephews, have thus become the largest marginal financiers of US deficits for the last 8 years.<\/p>\n

In short, the Fed and big banks are literally drinking Uncle Sam\u2019s debt-laced Kool aide.<\/p>\n

The Fed\u2019s money printer has thus become central to keeping credit markets alive despite the equal fact (paradox) that its rate hikes are simultaneously gutting bonds, banks and small businesses to fight inflation despite the stubborn fact that such inflation is still here.<\/p>\n

The Inflation Narrative: Form Over Substance<\/strong><\/h2>\n

My view, of course, is that the Fed\u2019s war on inflation is a\u00a0headline optic rather than policy fact<\/strong><\/a>.<\/p>\n

Like all debt-soaked and failing regimes, the Fed secretly wants inflation to outpace rates (i.e., it wants \u201cnegative real rates\u201d) in order to inflate away some of that aforementioned and embarrassing debt.<\/p>\n

But admitting that is akin to political suicide, and\u00a0the Fed\u00a0is<\/em>\u00a0political, not \u201cindependent.\u201d<\/strong><\/a><\/p>\n

Thus, the Fed will seek inflation while simultaneously\u00a0mis\/under-reporting CPI inflation<\/strong><\/a>\u00a0by at least 50%. I\u2019ve described this as \u201chaving your cake and eating it too.\u201d<\/p>\n

All that said, inflation, which was supposed to be transitory, is clearly sticky (as we warned from the beginning<\/strong><\/a>), and even its under-reported 6% range has the experts in a tizzy of comical proportions.<\/p>\n

Neel Kashkari, for example, is thinking the US may need to get rates to at least 6% to \u201cbeat\u201d inflation. James Bullard is asking for more rate hikes too.<\/p>\n

But what these \u201cgo higher, longer\u201d folks are failing to mention is that rate hikes make Uncle Sam\u2019s bar tab (i.e., debt) even more expensive, a fact which deepens rather than alleviates the US deficit nightmare.<\/p>\n

The War on Inflation is a Policy that Actually Adds to Inflation<\/strong><\/h2>\n

Ironically, however, few (including Kashkari, Bullard, Powell or just about any economic midget in the House of Representatives) are recognizing the additional paradox that greater deficits only\u00a0add\u00a0<\/em>to (rather than \u201ccombat\u201d) the inflation problem, as deficit spending (an economy on debt respirator) keeps artificial demand (and hence) prices rising rather than falling.<\/p>\n

Furthermore, these deficits will ultimately be paid for with more fiat fake money created out of thin air at the Eccles building, a policy which is inherently (and by definition): INFLATIONARY.<\/p>\n

In short, and as even Warren B. Mosler recently tweeted, \u201cthe Fed is chasing its own tail.\u201d<\/p>\n

Inflation, in other words, is not only here to stay, the Fed\u2019s \u201canti-inflationary\u201d rate hike policies are actually making it worse.<\/p>\n

Even party-line economists are forecasting higher core inflation this year:<\/p>\n<\/p>\n

The Real Solution to Inflation? Scorched Earth.<\/strong><\/h2>\n

In fact, the only way to truly dis-inflate the inflation problem is to raise rates high enough to destroy the bond market and the economy.<\/p>\n

Afterall, major recessions\/depressions do \u201cbeat\u201d inflation\u2014along with just about everything and everyone else.<\/p>\n

The current Fed\u2019s answer to combatting the inflation problem is in many ways the equivalent of combatting a kitchen rodent problem by placing dynamite in the sink.<\/p>\n

Meanwhile, the Rate Hikes Keep Blowing Things Up<\/strong><\/h2>\n

Buried beneath the headlines of one failing bank (and tax-payer-funded depositor bailout) after the next, is the equally dark picture of US small businesses, all of which rely on loans to stay afloat.<\/p>\n

But according to the U.S. Small Business Association, loan rates for the \u201clittle guys\u201d have reached double digit levels.<\/p>\n

Needless to say, such debt costs don\u2019t just hurt small enterprises, they destroy them.<\/p>\n

This credit crunch is only just beginning, as small enterprises borrow less in the face of rising rates.<\/p>\n

Real estate, of course, is just another sector for which the \u201cwar on inflation\u201d rate hikes are creating collateral damage.<\/p>\n

Homeowners enjoying the fixed low rates of days past are naturally remiss to sell current homes only to face the pain of buying a newer one at much higher mortgage rates.<\/p>\n

This means the re-sale inventory for older homes is shrinking, which means the market (as well as price) for new construction homes is spiking\u2014serving as yet another and ironic example of how the Fed\u2019s alleged war on inflation is actually adding to price inflation\u2026<\/p>\n

In short, Fed rate hikes can make inflation rise, and equally tragic, is that Fed rate cuts can also make inflation rise, as cheaper money only means greater velocity of the same, which, alas, is inflationary\u2026<\/p>\n

See the Paradox?<\/strong><\/h2>\n

And that, folks, is the paradox, conundrum, corner or trap in which our central planners have placed us and themselves.<\/p>\n

As I\u2019ve warned countless times, we must eventually\u00a0pick our poison<\/strong><\/a>: It\u2019s either a depression or an inflation crisis.<\/p>\n

Ultimately, Powell\u2019s rate hikes, having already murdered bonds, stocks and banks, will also murder the economy.<\/p>\n

Save the System or the Currency?<\/strong><\/h2>\n

At that inevitable moment when the financial and social rubble of a national and then global recession is too impossible to ignore, the central planners will have to take a long and hard look at the glowing red buttons on their money printers and decide which is worthing saving: The \u201csystem\u201d or the currency?<\/p>\n

The answer is simple. They\u2019ll push the red button while swallowing the blue pill.<\/p>\n

Ultimately, and not too far off in our horizon, the central planners will \u201csave\u201d the system (bonds and TBTF banks) by mouse-clicking trillions of more USDs.<\/p>\n

This simply means that the\u00a0deflationary<\/em>\u00a0recession ahead will be followed by a hyper-inflationary<\/em>\u00a0\u201csolution.\u201d<\/p>\n

Again, and worth repeating,\u00a0history confirms<\/strong><\/a>\u00a0in debt crisis after debt crisis, and failed regime after failed regime, that the last bubble to \u201cpop\u201d is\u00a0always the currency<\/strong><\/a>.<\/p>\n

A Long History of Stupid<\/strong><\/h2>\n

In my ever-growing data base of things Fed-Chairs have said that turned out to be completely and utterly, well\u2026100% WRONG, one of my favorites was Ben Bernanke\u2019s 2010 assertion that QE would be \u201ctemporary\u201d and with \u201cno consequence\u201d to the USD.<\/p>\n

According to this false idol, QE was safe because the Fed was merely paying out dollars to purchase Treasuries is an even swap of contractually even values.<\/p>\n

What Bernanke failed to foresee or consider, however, is that such an elegant \u201cswap\u201d is anything but elegant when the Fed is marred by an operating loss in which its Treasuries are tanking in value.<\/p>\n

That is, the \u201cswap\u201d is now a swindle.<\/p>\n

As deficits rise, the TBTF banks will require more mouse-clicked (i.e., inflationary) dollars to meet Uncle Sam\u2019s interest expense promise to the banks (\u201cInterest on Excess Reserves\u201d).<\/p>\n

In the early days of standard QE operations, at least the Fed\u2019s printed money was \u201cbalanced\u201d by its purchased USTs which the TBTF banks then removed from the market and parked \u201csafely\u201d at the Fed.<\/p>\n

But today, given the operating losses in play, the Fed\u2019s raw money printing will be like like raw sewage with nowhere to go but straight into the economy with an inflationary odor.<\/p>\n

Bad Options, Fluffy Words<\/strong><\/h2>\n

Again, the cornered Fed\u2019s options are simple\/stupid: It can continue to hawkishly raise rates higher for longer and send the economy into a depression and the markets into a spiral while declaring victory over inflation, or it can print trillions more fiat dollars to prop the system and neuter\/debase the dollar.<\/p>\n

And for this wonderful set of options, Bernanke won a Nobel Prize?<\/p>\n

The ironies do abound\u2026<\/p>\n

But as a famous French moralist once said, the highest offices are rarely, if ever, held by the highest minds.<\/p>\n

Gold, of course, is not something the Fed (nor anyone else) can print or mouse-click, and gold\u2019s ultimate role as a currency-insurer is not a matter of debate, but a matter of cycles, history and simple\/stupid common sense. (See below).<\/p>\n

Markets Are Prepping<\/strong><\/h2>\n

In the interim, the markets are slowly catching on to the fact that protecting purchasing power is now more of a priority than looking for safety in grossly and un-naturally inflated \u201cfixed income\u201d or \u201crisk-free-return\u201d bonds.<\/p>\n

Why?<\/p>\n

Because those bonds are now (thanks to Uncle Fed) empirically and mathematically nothing more than \u201cno-income\u201d and \u201creturn-free-risk.\u201d<\/p>\n

Meanwhile, hedge funds are building their net short positions in S&P futures at levels not seen since 2007 for the simple reason that they foresee a Powell-induced market implosion off the American bow.<\/p>\n

Once that foreseeable implosion occurs, get ready for the Fed\u2019s only pathetic tools left: Lower rates and trillions of instant liquidity\u2014the kind that kills a currency.<\/p>\n

In Gold We Trust<\/strong><\/h2>\n

The case for gold as insurance against such a backdrop of debt, financial fragility and openly dying currencies is, well: Simple stupid and plain to see.<\/p>\n

Few on this round earth see the simple among the complex better than our advisor and friend, Ronni Stoeferle, whose most recent\u00a0In Gold We Trust Report<\/strong><\/a>\u00a0has just been released.<\/p>\n

Co-produced with his Incrementum AG colleague, Mark Valek, this annual report has become\u00a0the<\/em>\u00a0seminal report in the precious metal space.<\/p>\n

The 2023 edition is replete with not only the most sobering and clear data points and contextual common sense, but also a litany of entertaining quotations from Churchill and the Austrian School to The Grateful Dead and\u00a0Anchorman<\/em>\u00a0\u2026<\/p>\n

Ronni and Mark unpack the consequences of a Fed that has raised rates too high, too fast and too late, which is, again a fact plain to see:<\/p>\n

<\/a><\/p>\n

Needless to say, hiking rates into an economic setting already historically \u201cdebt fragile\u201d tends to break things (from USTs to regional banks) and portends far more pain ahead, as both history and math also plainly confirm:<\/p>\n

\"\"<\/a><\/p>\n

In a debt-soaked world fully addicted to years of instant liquidity from a central bank near you, Powell\u2019s sudden (but again too late, too much) hiking policies will not \u201csoftly\u201d restrain market exuberance nor contain inflation without unleashing the mother of all recessions.<\/p>\n

Instead, the subsequent and sudden negative growth of money supply will only hasten a recession as opposed to a \u201csoftish\u201d landing:<\/p>\n

\"\"<\/a><\/p>\n

As the foregoing report warns, the looming approach of this recession is already (and further) confirmed by such basic indicators as the Conference Board of Leading Indicators, an inverted yield curve and the alarming spread between 10Y and 2Y yields.\u00a0<\/p>\n

Self-Inflicted Geopolitical Risks<\/strong><\/h2>\n

The report further examines the geopolitical shifts of which we have been warning(and writing) since March of 2022, when Western sanctions against Russia unleashed a watershed trend by the BRICS and other nations to seek settlement payments outside of the weaponized USD.<\/p>\n

One would be unwise to ignore the significance of this shift or underestimate the growing power of these BRICS (and BRICS \u201cplus\u201d) alliances, as their combined share of global GDP is rising not falling\u2026<\/p>\n

\"\"<\/a><\/p>\n

As interest in (and trust for) the now weaponized USD as a payment system declines alongside a weakening faith in Uncle Sam\u2019s IOUs, the world, and its central banks (especially out East) are turning away from USTs and turning toward physical gold.<\/p>\n

Again, I give credit to the\u00a0In Gold We Trust Report<\/em>:<\/p>\n

\"\"<\/a><\/p>\n

See a trend?<\/p>\n

See why?<\/p>\n

It\u2019s fairly simple, and for this we can thank the fairly stupid policies of the Fed in particular and the declining faith in their prowess in general:<\/p>\n

\"\"<\/a><\/p>\n

Myths Are Stubborn Things<\/strong><\/h2>\n

Many, of course, find it hard to imagine that a Federal Reserve based in DC and within the land of the Great American dream (and world reserve currency) could be anything but wise, efficient and stabilizing, despite an\u00a0embarrassing<\/strong>\u00a0Fed track record<\/strong><\/a>\u00a0that is empirically unwise, inefficient and consistently destabilizing\u2026<\/p>\n

Myths are hard to break, despite the fact the myth of MMT and QE on demand has been a failed experiment and is sending the US, as well as the global, economy toward a reckoning of historical proportions.<\/p>\n

But the messaging of \u201cKeep calm and carry on\u201d from Powell is calming in spirit despite the fact that it hides terrifying math and historically confirmed consequences for the fiat money by which investors still wrongly measure their wealth.<\/p>\n

But as Brian Fantana of\u00a0Anchorman<\/em>\u00a0would tell us, trust the central planners.<\/p>\n

\n

\u201cThey\u2019ve done studies, you know. 60% of the time it works every time.\u201d<\/strong><\/em><\/p>\n<\/blockquote>\n

\"\"<\/a><\/p>\n

As for us, we trust the kind of data Ronni and Mark have gathered and that barbarous relic of gold far more than calming words and debased, fiat currencies.<\/p>\n

As history reminds, when currencies die within a backdrop of unsustainable debt, gold in fact does work\u2014and\u00a0every<\/em>\u00a0time.<\/strong><\/p>\n<\/div>\n

Tyler Durden<\/a><\/span>
\nMon, 05\/29\/2023 – 07:30<\/span><\/p>\n

From:Zerohedge<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Facts Vs. Fed-Speak: A Comical History With Tragic Consequences Authored by Matthew Piepenburg via GoldSwitzerland.com, Below, we look at simple facts in the context of…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-1302000","post","type-post","status-publish","format-standard","hentry","category-news","wpcat-1-id"],"_links":{"self":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts\/1302000","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/comments?post=1302000"}],"version-history":[{"count":0,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts\/1302000\/revisions"}],"wp:attachment":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/media?parent=1302000"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/categories?post=1302000"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/tags?post=1302000"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}