Money Flow Trading Method along with Risk Management

https://www.oftwominds.com/blog.html

https://www.oftwominds.com/25-25.gifhttps://www.oftwominds.com/CHSbanner2d.png



It's All About Who Reaps the Gains (Asset Bubbles) and Who Eats the Losses (Stagnating Wages)

March 1, 2019
Even if the Fed hadn't institutionalized perverse incentives to borrow and speculate in asset bubbles, the economy would still be generating far fewer winners than losers.


If we scrape away the shuck and jive (a difficult task when the majority of what the media presents is shuck and jive) the whole economy boils down to who reaps the gains and who eats the losses. While conventional economics focuses on how much the pie is expanding (GDP is higher, yea!), the real action is in how the pie is sliced up and distributed.


Since the end of the dot-com boom (see chart below), which actually increased labor's share of the gains, the gains have all flowed to those holding assets that have bubbled higher while the losses have been distributed to 95% of those selling their labor for wages, and to everyone exposed to high inflation in big-ticket expenses such as healthcare insurance, rent and college tuition.


The central bank shenanigans that exacerbated this remarkably unequal distribution were sold as promoting "the wealth effect": as assets bubbled higher, the lucky recipients of this unearned wealth would feel richer and would then start borrowing and spending freely, propping up a sickly economy which was no longer expanding organically.

But since only the top 5% of households own enough assets to matter, this amounted to a stealth "trickle down" policy in which the top slice of asset owners would be so enriched they would spend more, and this spending would trickle down to the bottom 95%.

As this chart shows, the spending of the top 5% has far outpaced the spending of the bottom 95%, but as the chart of labor's share of the economy reveals, very little has trickled down.
https://www.oftwominds.com/photos201...-spending2.png

https://www.oftwominds.com/photos201...sation2-19.png

Not much trickled down. The Mercedes salesperson got a commission and the bistros and bars are crowded with free-spending top-5ers and wannabes living on debt, but this trickle hasn't been enough to push wages higher.

Meanwhile the neofeudal structure of the American economy-- an economy dominated by state-cartels that enforce monopolistic rentier skims on vast swaths of the economy (healthcare, higher education, national defense, etc.)-- guarantees prices rise while wages stagnate. Many of us have addressed the reality that official inflation (Consumer price Index) doesn't accurately reflect real-world price increases, especially in big-ticket expenses such as healthcare, higher education, housing/rent, vehicles, services, etc.

Also missing in the statistics is the enormous difference between those protected from real-world price increases via government employment or subsidies, and those fully exposed to the unrelenting leaps in costs the unprotected.

By reducing interest on safe assets such as savings to near-zero, the Fed has pushed everyone into risk assets. This has pushed prices higher as bubbles inflate, but it's exposed much of the nation's capital to catastrophic declines as the artificial asset bubbles pop.

Even if the Fed hadn't institutionalized perverse incentives to borrow and speculate in asset bubbles, the economy would still be generating far fewer winners than losers. As I've described in my books (Get a Job and Build a Real Career, Money and Work Unchained and Pathfinding our Destiny), many of the skills and credentials that once had scarcity value no longer have any scarcity value, and so the value of those skills and credentials in the marketplace has declined accordingly.

When only 20% of the working populace had a college diploma, that diploma had some scarcity value. Now that roughly half the working populace has a college diploma or some college, the scarcity value of college diplomas has fallen to near-zero except in specific fields--fields which are quickly inundated with a flood of new graduates once the word gets out, reducing the value of that diploma to background noise.

As a result of these factors--the neofeudal economy and an over-abundance of normal capital and labor--only the top 5% of wage-earners have enjoyed real increases in earned income.
https://www.oftwominds.com/photos201...ality12-17.jpg


There are no easy answers to these structural realities. It's difficult to wean an economy that's dependent on assets bubbles off of asset bubbles, and it's difficult to reverse demographic and technological changes.


Our goal should be to eliminate the privileges embedded in neofeudal structures and create structures which open opportunities to get ahead for everyone rather than for just a select few. I describe such a system in my book A Radically Beneficial World. Doing more of the what's failed is not going to change the structure whose only possible output is more failure.




Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($6.95 ebook, $12 print, $13.08 audiobook): Read the first section for free in PDF format.

My book Money and Work Unchained is now $6.95 for the Kindle ebook and $15 for the print edition. Read the first section for free in PDF format.


If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.


America teeters on the precipice: our government is now captive to special interests and big money, twin cancers that threaten our democracy. This accelerating crisis is exacerbated by a toxic social media-fueled tribalism that has replaced “what do you think?” with “which side are you on?”


Our crisis isn’t just political—it’s structural: as the pace of change explodes from gradual to non-linear, the organizations that dominate our economy—centralized corporations and government—become destined to fail. We see this failure in both the soaring inequality that has hollowed out the American Dream as well as in the rising tide of social and political disunity.


To prevent the fall of our democratic republic, we must transform our economy and society from the ground up. As we enter a new era of rapid, unprecedented tumult, it is we citizens who will need to save our democracy. For our political and financial elites will cling to their centralized power, doing more of what’s failed, even as civil society unravels.


All is not lost--yet. Our way forward starts with understanding the fatal flaws of our brittle, self-serving status quo and embracing this basic truth: better options are available if we’re willing to explore.


To path find our way to a better destiny, we must create new localized structures optimized for resilience and adaptability—a flexible, decentralized, sustainable, democratic, opportunity-for-all nation.

Read the first section for free in PDF format.
Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic.


Recent entries:
It's All About Who Reaps the Gains (Asset Bubbles) and Who Eats the Losses (Stagnating Wages) March 1, 2019
The Doomsday Scenario for the Stock and Housing Bubbles February 27, 2019
Now that Housing Bubble #2 Is Bursting...How Low Will It Go? February 26, 2019
What's Been Lost: The Value of Being Reasonable February 25, 2019
Food Diversity's Enormous Impact on Your Health February 23, 2019
10 Common-Sense Amendments to the U.S. Constitution February 22, 2019
Homeless Encampments and Luxury Apartments: Our Long Strange BoomFebruary 21, 2019


February 2019 January 2019 December 2018
Archives 2005-2018


COMMENTS FROM BENJAMIN: So will any of you get involved and help to change what needs to be changed ? We both know the answer.

https://www.zerohedge.com/news/2019-...ops+to+zero%29


Crushing VIX & The Flip-Flopping Narrative Of The Bulls


https://zh-prod-1cc738ca-7d3b-4a72-b...?itok=LY4e264-
by Tyler Durden


Sun, 03/03/2019 - 12:20



Authored by Sven Henrich via NorthmanTrader.com,
Every week the village gathers and watches the regularly scheduled public crushing of Mr. $VIX. It doesn’t matter what happens in the world during the week, it doesn’t matter what economic reports may bring, or what earnings reports may miss. Every single Friday, irrespective of any new data, Mr. $VIX is found guilty and crushed to death. I’ve been making light of the predictability of it all on twitter by calling the program Risk Free Friday the past few weeks.
https://zh-prod-1cc738ca-7d3b-4a72-b.../VIX-Crush.png




Why? Well, because it’s self-evidently true:
https://zh-prod-1cc738ca-7d3b-4a72-b...es/SPX-VIX.png




Indeed in the most recent weeks we can observe that markets make little progress during the week and most, if not all, gains for the week are coming via a magic overnight gap, ramp and camp on Fridays during which the $VIX is relentlessly crushed:
https://zh-prod-1cc738ca-7d3b-4a72-b...mages/VIX5.png






What do you call a market that behaves the same way on a particular day every week? Predictable for one which of course breeds opportunity. Who wouldn’t want to know the outcome of a market on a particular day every week?

Welcome back to market price discovery driven by central planning committee and artificial liquidity. China is pumping stimulus, central banks are dovish and buybacks are running wild. It’s the same program we’ve seen for years that has traders sitting on their hands watching volatility compression producing tight intra-day ranges while rendering incoming data irrelevant.
It’s the same volatility compression program that invariably produces an energy release of size:

http://www.whatdoesitmean.com/index2802.htm


March 3, 2019
Putin-Trump Battle Demonic Socialist Monster As Soul Of Europe Hangs In Balance—And America’s Too

By: Sorcha Faal, and as reported to her Western Subscribers

A compelling new Ministry of Foreign Affairs (MoFA) report circulating in the Kremlin today states that with President Putin having an approval rating among the Russian people of 64.8%, and President Trump having a 49% approval rating among his America peoples, these two most powerful national-populist leaders in the world now tower over their socialist opponents as the long awaited battle over the “Soul of Europe” is about to be played out in the 23-26 May 2019 European Parliament Election that will determine the future of over 512 million Europeans living in 28 member nations---and that comes at the same time Western socialist leaders’ popularity continues to plummet—such as Canadian Prime Minister Justin Trudeau seeing his popularity dropping to 35%, the British leader Prime Minister Theresa May having barely 36% popularity amongst her people, French President Emmanuel Macron having only 28% of his peoples’ support, and even Western socialist leader German Chancellor Angela Merkel watching as her popularity has fallen to 40% as her reign nears its end—thus creating, once again, a titanic struggle for free peoples against demonic socialism that after being fought in Europe in 2019, will cross the Atlantic and embroil America in 2020. [Note: Some words and/or phrases appearing in quotes in this report are English language approximations of Russian words/phrases having no exact counterpart.]

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According to this report, socialism is a failed political ideology whose most basic belief favors the collective ownership of all property, versus that owned by individuals or companies—along with its calling for the state to manage all means of production for the sole benefit of workers—and is indistinguishable from the ideology of communism that establishes the political framework which socialism exists in—and whose catastrophic legacy over the past 100-years has left 100 million people dead.

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Though the American people have been indoctrinated to believe that nation-state socialist-communism originated in Russia upon the ascent to full dictatorial power of Vladimir Lenin in 1917, this report notes, nothing could be further from the truth—as the first world leader to implement this failed and destructive ideology was the 26th President of the United States Theodore Roosevelt.

Upon the assassination death of President William McKinley on 14 September 1901, this report explains, he was succeeded by his Vice President Theodore Roosevelt—and whom immediately upon taking power, declared all-out war against America’s corporations and moneyed elite banking and financial class—and in the “New Green Deal” of his day, unilaterally seized over 250 million acres of land from its private owners to create what is known now as the US National Park System.

During his second term in office, this report continues, Roosevelt attempted to force on the United States his full socialist agenda—but was stopped in doing so by his own Republican Party who, in 1908, ran for the presidency their new candidate William Howard Taft—who became the 27th President of the United States.

Not giving up on his socialist dreams for America, however, this report further details, Roosevelt sought the presidency again in 1910—but after being blocked for nomination by his own Republican Party, created a new one he named The Progressive “Bull Moose” Party—the result of which saw Roosevelt wining 4.1 million votes (27%), compared to Taft's 3.5 million (23%)—and was won by Democrat Party nominee Woodrow Wilson who gained 6.3 million votes (42% of the total) and a massive landslide in the Electoral College of 435 electoral votes to become the 28th President of the United States.

Most important to note about Roosevelt’s run for the presidency in 1910, this report says, is that he swapped out the name “socialism” for “progressive”—with his explaining his reason for doing so during his infamous “New Nationalism Speech” by saying he didn’t want to be called the communist he actually was—whose speech was adopted in its entirety for The Socialist Party Platform for 1912—and was a call by Roosevelt to the American people to give up their freedom and be ruled by Washington only—and for reasons he stated as:
This means that our government, National and State, must be freed from the sinister influence or control of special interests.

Exactly as the special interests of cotton and slavery threatened our political integrity before the Civil War, so now the great special business interests too often control and corrupt the men and methods of government for their own profit.

We must drive the special interests out of politics. That is one of our tasks to-day.

There can be no effective control of corporations while their political activity remains.

To put an end to it will be neither a short nor an easy task, but it can be done.

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Though Roosevelt failed in his goal to force upon the American people his socialist agenda in 1910, this report points out, his successful tactics to divide his nation’s peoples along class and ideological lines to achieve total political power was, most certainly, noticed by his socialist European counterparts—the two most important of them being the National Socialist German Workers' Party (aka Nazi Party) and the Russian Social Democratic Labour Party (aka Communist Party of the Soviet Union)—both of whom were able to take total control of their nations and peoples using Roosevelt’s class division tactics—but one of whose most catastrophic results of doing so was World War II.

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Left in the aftermath of World War II, this report explains, were global leaders perplexed and divided as to how to best deal with the popular appeal of socialist ideology that had caused tens-of-millions of deaths—whose most fevered supporters of just happened to be the majority population in every single nation—its working class peoples who were always being manipulated by the greed of their corporate and banking classes.

The choice of the Soviet Union was to maintain a strict socialist society governed by communist ideology—but whose massive contradictions of every thing being controlled from the top down, thus giving the individual no incentive to do anything independent of the state (most critically actually work for a living) imploded upon itself in 1991.


The choice of Western European nations was to adopt what they called a democrat-socialist system—which gave their peoples limited freedoms in exchange for “cradle-to-grave” social services—but whose catastrophic consequence of has led to crashing birth rates as people could no longer to afford having families, crushing tax rates not enough people or companies are left to pay, and stagnating economies that today are nearing collapse.

In the United States, however, this report says, they adopted a system of what can best be described as “socialism light”—that they call a “social safety net” which allows their people to have near total freedom, while at the same time they’re buffered from the worst excesses of capital greed imposed on workers by their corporate and banking class—and even though being a cyclical economic system having euphoric highs and scary downs, nevertheless the Americans have been able to maintain the greatest economic engine for wealth the modern world has ever seen.

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With President Theodore Roosevelt’s century old socialist agenda being trotted out in America for another go-round, this report concludes, its tactics to sow class division are being amplified by as many other societal fracture points (such as race, religion, sex, you name it) the Democrat Party and their leftist mainstream propaganda media establishment lapdogs can think of—all of whom are being met by a President Trump who has vowed he will never allow the United States to become a socialist nation—most particularly because he knows the fact that socialism has never worked, a hundred million people have died because of it, and we need a wealthier world, not wealth distribution—facts that were, also, known by the great President Ronald Reagan who most famously stated while he watched the Soviet Union implode: “Socialism only works in two places: Heaven where they don't need it and hell where they already have it”.

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March 3, 2019 EU and US all rights reserved. Permission to use this report in its entirety is granted under the condition it is linked back to its original source at WhatDoesItMean.Com. Freebase content licensed under CC-BY and GFDL.

[Note: Many governments and their intelligence services actively campaign against the information found in these reports so as not to alarm their citizens about the manybucatastrophic Earth changes and events to come, a stance that the Sisters of Sorcha Faal strongly disagree with in believing that it is every human beings right to know the truth. Due to our missions conflicts with that of those governments, the responses of their ‘agents’ has been a longstanding misinformation/misdirection campaign designed to discredit us, and others like us, that is exampled in numerous places, including HERE.]

[Note: The WhatDoesItMean.com website was created for and donated to the Sisters of Sorcha Faal in 2003 by a small group of American computer experts led by the late global technology guru Wayne Green (1922-2013) to counter the propaganda being used by the West to promote their illegal 2003 invasion of Iraq.]
[Note: The word Kremlin (fortress inside a city) as used in this report refers to Russian citadels, including in Moscow, having cathedrals wherein female Schema monks (Orthodox nuns) reside, many of whom are devoted to the mission of the Sisters of Sorcha Faal.]

https://www.theburningplatform.com/2...m/#more-192696

Guest Post by David McWilliams

Is Ben Bernanke the father of Alexandria Ocasio-Cortez? Not in the literal sense, obviously, but in the philosophical and political sense.


As we mark the 10th anniversary of the bull market, it is worth considering whether the efforts of the US Federal Reserve, under Mr Bernanke’s leadership, to avoid 1930s-style debt deflation ended up spawning a new generation of socialists, such as the freshman Congresswoman Ms Ocasio-Cortez, in the home of global capitalism.


Mr Bernanke’s unorthodox “cash for trash” scheme, otherwise known as quantitative easing, drove up asset prices and bailed out baby boomers at the profound political cost of pricing out millennials from that most divisive of asset markets, property. This has left the former comfortable, but the latter with a fragile stake in the society they are supposed to build.

As we look towards the 2020 US presidential election, could Ms Ocasio-Cortez’s leftwing politics become the anthem of choice for America’s millennials?

But before we look forward, it is worth going back a bit. The 2008 crash itself didn’t destroy wealth, but rather revealed how much wealth had already been destroyed by poor decisions taken in the boom. This underscored the truism that the worst of investments are often taken in the best of times.

Mr Bernanke, a keen student of the 1930s, understood that a “balance sheet recession” must be combated by reflating assets. By exchanging old bad loans on the banks’ balance sheets with good new money, underpinned by negative interest rates, the Fed drove asset prices skywards. Higher valuations fixed balance sheets and ultimately coaxed more spending and investment. However, such “hyper-trickle-down” economics also meant that wealth inequality was not the unintended consequence, but the objective, of policy.

Soaring asset prices, particularly property prices, drive a wedge between those who depend on wages for their income and those who depend on rents and dividends. This wages versus rents-and-dividends game plays out generationally, because the young tend to be asset-poor and the old and the middle-aged tend to be asset-rich. Unorthodox monetary policy, therefore, penalises the young and subsidises the old.


When asset prices rise much faster than wages, the average person falls further behind. Their stake in society weakens. The faster this new asset-fuelled economy grows, the greater the gap between the insiders with a stake and outsiders without. This threatens a social contract based on the notion that the faster the economy grows, the better off everyone becomes.

What then? Well, politics shifts.

Notwithstanding Winston Churchill’s observation about a 20-year-old who isn’t a socialist not having a heart, and a 40-year-old who isn’t a capitalist having no head, polling indicates a significant shift in attitudes compared with prior generations.

According to the Pew Research Center, American millennials (defined as those born between 1981 and 1996) are the only generation in which a majority (57 per cent) hold “mostly/consistently liberal” political views, with a mere 12 per cent holding more conservative beliefs.

Fifty-eight per cent of millennials express a clear preference for big government. Seventy-nine per cent of millennials believe immigrants strengthen the US, compared to just 56 per cent of baby boomers. On foreign policy, millennials (77 per cent) are far more likely than boomers (52 per cent) to believe that peace is best ensured by good diplomacy rather than military strength. Sixty-seven per cent want the state to provide universal healthcare, and 57 per cent want higher public spending and the provision of more public services, compared with 43 per cent of baby boomers. Sixty-six per cent of millennials believe that the system unfairly favours powerful interests.

One battle ground for the new politics is the urban property market. While average hourly earnings have risen in the US by just 22 per cent over the past 9 years, property prices have surged across US metropolitan areas. Prices have risen by 34 per cent in Boston, 55 per cent in Houston, 67 per cent in Los Angeles and a whopping 96 per cent in San Francisco. The young are locked out.

Similar developments in the UK have produced comparable political generational divides. If only the votes of the under-25s were counted in the last UK general election, not a single Conservative would have won a seat.

Ten years ago, faced with the real prospect of another Great Depression, Mr Bernanke launched QE to avoid mass default. Implicitly, he was underwriting the wealth of his own generation, the baby boomers. Now the division of that wealth has become a key battleground for the next election with people such as Ms Ocasio-Cortez arguing that very high incomes should be taxed at 70 per cent.

For the purist, capitalism without default is a bit like Catholicism without hell. But we have confession for a reason. Everyone needs absolution. QE was capitalism’s confessional. But what if the day of reckoning was only postponed? What if a policy designed to protect the balance sheets of the wealthy has unleashed forces that may lead to the mass appropriation of those assets in the years ahead?

The writer is an economist, author and broadcaster

https://www.jacobinmag.com/2019/02/m...y-isnt-helping

Modern Monetary Theory Isn’t Helping
BY
DOUG HENWOOD


MMT is billed by its advocates as a radical new way to understand money and debt. But it’ll take more than a few keystrokes to change the economy.
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Our new issue, on what a President Bernie Sanders could actually do in office, is out now. Subscribe today to receive it!

Introducing The ABCs of Capitalism


Peter Gowan
When we dream it, when we dream it, when we dream it
We’ll dream it, dream it for free, free money
Free money, free money, free money, free money, free money, free money
— Patti Smith


Now that policies made famous by Bernie Sanders, like Medicare for All and free college, and newer ones like the Green New Deal, are infiltrating the political mainstream, advocates are always faced with the question: “how would you pay for them?” Although there are good answers to “this question” that could even be shrunk down to a TV-friendly length and vocabulary, they’re not always forthcoming. Even self-described socialists seem to have a hard time saying the word “taxes.” How lovely would it be if you could just dismiss the question as an irrelevant distraction?


Conveniently, there’s an economic doctrine that allows you to do just that: Modern Monetary Theory (MMT). Newly elected Rep. Alexandria Ocasio-Cortez is at least MMT-curious, and it’s all over Marxist reading groups and Democratic Socialists of America chapters. It’s even seeping into the business press — Bloomberg’s Joe Weisenthal is friendly to the doctrine. James Wilson of the New York Times tweeted recently, “The speed with which young activists on both left and right are migrating toward MMT is going to have a profound effect on US politics in the 2020s and 2030s.”


While adherents strenuously profess that MMT is subtler and more complex than this, its main selling point is that governments need not tax or borrow in order to spend — they can just create money out of thin air. A few computer keystrokes and everyone gets health insurance, student debt disappears, and we can save the climate too, without all that messy class conflict.

That’s a bit of a caricature, but as we’ll see, not an outlandish one.

At the center of MMT is a small group of academics, reinforced by a fervent army of acolytes on social media. Leading academic names include L. Randall Wray, now of the Levy Institute at Bard College; Stephanie Kelton at Stony Brook; Scott Fullwiler of the University of Missouri at Kansas City (UMKC, which has served as the MMT’s Vatican — both Wray and Kelton spent many years there); Pavlina Tcherneva, also of Bard (though she got her PhD and spent six years at UMKC). Though not a core member of the club, James Galbraith of the University of Texas, a prominent progressive economist, is a fellow traveler. Hovering above, behind, and around them is the figure of Warren Mosler, who runs a hedge fund, holds forth on MMT, and writes big checks in support of the cause. Mosler, whom Galbraith has described as a “national treasure,” isn’t afflicted with false modesty: he calls his blog “the center of the universe” and on it quotes a description of his very slender book Soft Currency Economics as “The most important book ever written.” He lives in the US Virgin Islands because it is a tax shelter with nice weather, a point worth keeping in mind when we look more closely at MMTers’ thoughts on taxation.


Two founding documents of MMT both came out in 1998: Wray’s book Understanding Modern Money and Kelton’s paper “Can Taxes and Bonds Finance Government Spending?” Both argue for several points that remain central to MMT today: governments designate the one official currency for a country by accepting only that unit for the payment of taxes. And a “monetarily sovereign” government — the United States is one, Greece isn’t (because of the euro), Brazil’s status is ambiguous (since it issues its own currency but has nowhere near the power or autonomy of the US) — can issue that currency without limit. As Wray put it, “The government does not ‘need’ the ‘public’s money’ in order to spend; rather the public needs the ‘government’s money’ in order to pay taxes. Once this is understood, it becomes clear that neither taxes nor government bonds ‘finance’ government spending.” You might be wondering where income earned on the job fits into all of this, but the world of production doesn’t play a large role in the theory.


But having tempted us into thinking that taxes were dispensable, Wray pulls a bait and switch. Since there is a risk that too much government spending would spark inflation, the government might need to cool things down, meaning create a recession — though Wray shies away from using the word — by raising taxes. Taxes, MMT holds, should be used as tools of economic management, but must never be thought of as “funding” government. To think that would be to indulge in an orthodox superstition.


Kelton’s paper foreshadowed what would become a trademark of MMT writing: detailed accounting exercises designed to show what happens, mechanically speaking, when the government spends money. These are mobilized to ask “why should the government take from the private sector the money . . . that it alone is capable of creating? . . . Indeed, the entire process of taxing and spending must, as a matter of logic, have begun with the government first creating (and spending) new government money.” Government is as a God, giving economic life through spending: until it spends, we have no money. Taxes and borrowing are merely means to manage the level of reserves in the banking system.


Much of the MMT literature is an elaboration of the arithmetic of bank reserves, the money banks set aside as a backstop against a run, in the form of cash in the vault or deposits held at the central bank. Reserve accounting is important if you’re a financial economist or a central banker, but it’s of limited relevance to anyone concerned with big-picture economic questions. Absent from Kelton’s paper, Wray’s book, and much of the subsequent MMT literature, is any sense of what money means in the private economy, where workers labor and capitalists profit from their toil and compete with each other to maximize that profit, a complex network of social relations mediated by money.


Although the politics of MMT lean left, the angle of the tilt is hard to measure precisely. Mosler was described by a colleague as “politics agnostic”; by Yves Smith of Naked Capitalism, a promoter of the school, as a “conservative.” Wray has said MMT is compatible with a libertarian, small government view of the world. Kelton, in an interview with the activist and journalist Nomiki Konst in which she describes MMT as a “brand,” graciously concedes that “Marx was important at some point.”
Despite advertising its modernity with its name, MMT has roots going back over a century. Its earliest precursor is The State Theory of Money by the right-wing German economist Georg Friedrich Knapp, published in 1905. It is an odd book. Using a cascade of terms like “hylolepsy” and “synchartism,” Knapp argues that the state names the currency by law, and by the practice of only accepting tax payments denominated in that currency. This doctrine, known as chartalism, is in one sense incontrovertible; states feel very strongly about their currency and punish people who counterfeit it. You must pay taxes in the official currency or you will go to jail. No modern country not in crisis would tolerate multiple currencies circulating in its borders (though the dollar didn’t become the sole legal US currency until 1863). But how that official currency relates to the rest of society is barely addressed.


A second ancestor of MMT, and one its proponents cite frequently, is a 1946 paper by the New Deal adviser and businessman Beardsley Ruml that appeared in American Affairs: A Quarterly Journal of Free Opinion, a publication of the then quite conservative National Industrial Conference Board. The eccentric Ruml, identified in the magazine’s notes on contributors as “an audacious thinker,” declared in the title of his essay that “Taxes for Revenue are Obsolete.” The central claim is in this passage:
The necessity for a government to tax in order to maintain both its independence and its solvency is true for state and local governments, but it is not true for a national government. . . . Final freedom from the domestic money market exists for every sovereign national state where there exists an institution which functions in the manner of a modern central bank, and whose currency is not convertible into gold or into some other commodity. The United States is a national state which has a central banking system, the Federal Reserve System, and whose currency, for domestic purposes, is not convertible into any commodity. It follows that our Federal Government has final freedom from the money market in meeting its financial requirements.


It’s an early statement of the MMTers’ favorite hobbyhorse: taxes might be useful to tinker with the income distribution, or discourage vices, or to fight inflation by draining purchasing power from the economy. But governments don’t really need the revenue — they can just print the money.

Since Ruml’s essay is based on pure assertion, his oracular status among MMTers seems to come from his role as chair of the Federal Reserve Bank of New York. But that’s mostly an honorary post. (Its current occupant is Sara Horowitz, founder of the Freelancers Union.) He had no special knowledge of central banking or fiscal politics. In the 1920s, Ruml doled out money for the Rockefeller Foundation. In 1926, he gave some of that money to the Geneva Institute, a Swiss think tank that would become, in the historian Quinn Slobodian’s words, “an important institutional hub for the future neoliberals.” Ruml’s day job at the time he wrote the American Affairs essay was as chair of Macy’s, a role he took after years of service as its treasurer.


An occasional subject for New Yorker profiles in the 1940s and 1950s, Ruml also served on a number of corporate boards, including that of Muzak, whose aural product he recommended to a “Talk of the Town” reporter as a great way to improve productivity by 18 percent among people doing “monotonous” work. Perhaps not coincidentally, more than half of his American Affairs essay is devoted to denouncing the corporate profits tax as “evil,” part of Ruml’s campaign, outlined in a three-part 1945 New Yorker profile, to eliminate it.


MMTers mostly forget about this part of the Ruml oeuvre: though Warren Mosler, writing in the Huffington Post, acknowledged that Ruml “was writing about the merits of corporate taxes,” he didn’t reproduce Ruml’s characterization of them as evil, which might have alienated HuffPo’s liberal audience.
Although the politics of MMT leans left, the angle of the tilt is hard to measure precisely.


Aside from Knapp and Ruml, MMTers take inspiration from the economist Abba Lerner, in particular his 1943 paper, “Functional Finance and the Federal Debt,” which is neither outlandish nor right-wing. It was written in the middle of World War II, when fiscal prudence didn’t merely take a back seat to the war effort, it wasn’t even in the vehicle. Because of the war experience, all the old rules of balanced-budget fiscal orthodoxy seemed utterly antique, and the conviction grew that clever fiscal management could tame the business cycle and minimize unemployment.


Lerner’s opening sentence expresses a wish for the postwar world: “Apart from the necessity of winning the war, there is no task facing society today so important as the elimination of economic insecurity.” His proposed doctrine of functional finance held that “government fiscal policy, its spending and taxing, its borrowing and repayment of loans, its issue of new money and its withdrawal of money, shall all be undertaken with an eye only to the results of these actions on the economy and not to any established traditional doctrine about what is sound or unsound.” In other words, if unemployment is rising, loosen policy (boost spending, cut taxes, lower interest rates), and if inflation is rising, tighten policy (the reverse). On first glance, this sounds completely reasonable. But on second, it’s a lot more complicated.
For one thing, it often takes time to understand what’s going on in the economy, and it takes even more time to change policy — and sometimes, like in the 1970s, unemployment and inflation are both rising, and it’s not obvious what policy should do in response. Anyone who’s watched Congress struggle with tax and spending policy has to wonder how anyone could believe that fiscal policy could be fine-tuned with requisite speed and precision.


MMTers extend this hubris about the precision and power of policymaking to the realm of interest rates, which they think the central bank is completely in control of and should be kept as close to zero as possible. (Mosler thinks rates should actually be zero.) Although MMTers tend to talk casually of “the” interest rate, in fact there are many. Long-term government bonds, for example, are almost always going to carry higher rates than short-term ones, because so many more unpredictable things can happen before the bond reaches maturity. And either is going to yield less than a bank loan of similar maturity to an oil wildcatter or the corner bodega, because of the higher risk of default.


Without higher interest rates to compensate for greater default risk or longer maturities, there will simply be no one willing to buy the bonds or issue the loans. MMTers would answer that the Federal Reserve (or any comparable central bank around the world) could buy up the bonds instead. But that would, if carried to extremes, run the risk of runaway inflation — and it still wouldn’t help the wildcatter or the bodega owner. MMTers say little about how far this process could be carried on.


That brings us to the next problem: inflation. When the printing presses run freely, it’s not only reactionaries who think that runs the risk of spiraling prices. As I was researching this piece, many people to whom I described MMT, from Democrats to Marxists, brought it up as a worry. MMTers are coy about the topic — they never say how much is too much, and they profess great confidence in their ability to control it. In a paper criticizing MMT, the left-Keynesian economist Thomas Palley says he’s heard a “leading” MMTer say inflation less than 40 percent is “costless.” That’s nearly three times the modern US record of just under 15 percent in 1980, which was widely regarded, and not just by bondholders, as a crisis. Since wages typically lag behind price changes, inflations can lead to real declines in living standards.

Though it might scandalize some liberals to say so, it’s dangerous to be sanguine about inflation. People find it destabilizing and it feeds a hunger for order. The rise in inflation through the 1970s that climaxed in that 15 percent record helped grease the way for Reagan. The extreme inflation of Weimar Germany in the 1920s contributed to the rise of Hitler. As a British diplomat stationed at the embassy in Berlin wrote to his bosses at home during the hyperinflation: “The population is ripe to accept any system of firmness or for any man who appears to know what he wants and issues commands in a loud, bold voice.”

The standard view of the Weimer inflation is that the German economy, severely damaged by World War I and forced to make huge reparations payments to the victors, wasn’t up to the task — it just didn’t have the productive capacity, and its citizens were both unwilling and unable to pay the necessary taxes. So instead the government just printed money and spent it, not only to pay its own bills, but to support bank lending to the private sector. (The printing presses were so overworked that they had trouble keeping up with the demand for fresh banknotes. At least keystroke money wouldn’t face this problem.) Inflation peaked at 29,500 percent in October 1923, meaning that prices doubled every four days. The value of the mark collapsed from 320 per US dollar in early 1922 to over 4 trillion per dollar in late 1923, meaning the mark lost 99.999999992 percent of its value in a year and a half. The value of the real wage, if it’s possible to measure amid such rapid inflation, fell by over 80 percent, as pay badly lagged price increases.


In When Money Dies, a classic popular history of the Weimar inflation, Adam Fergusson wrote that the savaging of living standards brought “hunger, disease, destitution and sometimes death” to the mass of Germans. Hyperinflation was only stopped with a deep austerity program — government spending cuts, layoffs, wage cuts, the usual. Tax payments were linked to gold values, not the worthless notes from the printing press. Unemployment soared. But the inflation ended.
Wray’s explanation of the Weimar hyperinflation, one of the most dazzling of all time, is odd. The deficits, Wray explained in his book, were caused by the inflation, not the other way around. In the end, “Germany adopted a new currency, and while it was not legal tender, it was designated acceptable for tax payment. The hyperinflation ended.” Almost nothing about the printing press — he dismisses “printing money” explanations as “far too simple” — and nothing at all about the austerity program. No, there was just an unexplained monetary intervention somehow linked to tax payments. Weimar Germany may be an extreme case, but since it’s often brought up by critics of MMT — “won’t all that keystroking lead to inflation, like Argentina or Weimar?” — it’s one for which they need to have a good answer. Wray’s reluctance to face head-on the risks of printing money makes you wonder how confident he really is of his own theory.


Another serious problem with MMT is its embeddedness in a rich-country perspective, and in particular American exceptionalism — in this case the “exorbitant privilege,” as a French finance minister once put it, that comes with issuing the world’s dominant currency. Countries around the world keep their reserves (basically rainy-day funds on a very large scale held by governments at their central banks) in dollars, which make them effectively a captive market for US Treasury bonds (which is how the dollars are kept). Also, major commodities like oil are priced in dollars, forcing countries to accumulate the currency to pay for essential imports. That means the United States, exceptionally, can run giant deficits and borrow on a vast scale with little constraint (so far). Nor do we have to worry about the value of the dollar (for now, though you have to wonder how long the exorbitant privilege will last in a world where US dominance is eroding).


But less privileged countries have to worry about foreign investors dumping their bonds and driving down the value of their currency, which would jack up interest rates and inflation. Salvador Allende’s governmentgreatly increased spending and raised the incomes of the poorest in Chile in the early 1970s; that worked nicely for a while, but then inflation took off. Allende wasn’t operating from the MMT playbook, merely resorting to policies pursued by many progressive governments facing political opposition and resource constraints. But such experiments rarely end well, and similar problems would face a poor country trying to stimulate its way to prosperity today, as we see in Venezuela now.


Compared to the United States, such countries enjoy less “monetary sovereignty” — a core MMT concept. A monetarily sovereign state is one that can spend its currency at will, including from pure keystrokes. America enjoys a lot of monetary sovereignty; so do Canada, Japan, and Britain, though to a lesser degree. Those countries need, for example, to import things priced in dollars, like oil, and the value of their currency has a direct effect on living standards that Americans are insulated from because we can print the currency in which that oil is priced. Brazil, in turn, has even less freedom; it needs harder currencies like dollars and euros to import commodities and advanced manufactured goods; and poorer countries like Bolivia or Ghana have even less. To buy essential imports, these countries often have to borrow in those hard currencies. To pay off the loans, they need to earn foreign currency through exports.


MMT has little helpful to say about that situation — in fact, its advocates sometimes seem to lecture them that foreign borrowing is risky, which it is, but sometimes it’s the only way you can buy power plants and locomotives. MMTers like William Mitchell and Wray write as if borrowing abroad is just a bad choice, and not something forced on subordinate economies. When I asked Mosler what MMT had to offer Turkey, a country whose currency has been losing value for the last four years and had something of a financial crisis in the summer of 2018, he responded with a bit of avian whimsy: “Without our recipe for Turkey they’re a dead duck.”

(In fact, Turkey had been pursuing MMT-friendly expansionary fiscal and monetary policies, including state guarantees of private corporate debt, and inflation was around 11–12 percent and rising.) Not satisfied with that answer, I said that while I understood the risks of borrowing in a foreign currency, which Turkey had done a lot of, there’s not much sophisticated capital equipment available for sale in Turkish lira. Mosler answered, wrongly, that you could actually buy “a lot” of such goods in lira, and that “Any nation can sustain domestic full employment without imports of capital goods” — totally missing the point that a country looking to ascend in the global economic hierarchy needs investment goods that are only made in countries like Germany or Japan.


Member countries in the euro are a case unto themselves. Greece and the other debtors on the continent’s periphery have little sovereignty — they have big foreign debts in a currency they can’t print. Greece could have left the euro, as many on the Left urged, but that would have been massively disruptive, and even leaving that aside, it wouldn’t have addressed the country’s long-standing structural weaknesses, like an underfunded state and an underdeveloped industrial infrastructure. Symptomatic of that relative weakness: in the twenty years prior to the introduction of the euro, the drachma lost 88 percent of its value. Inflation over that period averaged over 14 percent a year. In 1980, Greek per capita GDP was 73 percent of the US’s; by 2002, that had fallen to 60 percent. In other words, Greece’s economic problems long predate the euro. And even though they don’t literally print the currency, core eurozone countries like Germany and the Netherlands hardly suffer from their formal lack of monetary sovereignty. What matters far more is your place in the global economic food chain — and that can be annoyingly sticky.
MMT’s unacknowledged dependence on the exorbitant privilege of the United States —Mitchell is about the only high-profile MMTer from abroad — is almost completely unaddressed by its proponents.


MMT is an outgrowth of a school called post-Keynesian (PK) economics. In fact, several of the principals met each other on a post-Keynesian thought listserv in the late 1990s. PK economics has several sub-schools, and there’s not much point in getting too deeply into each, but there are some general points about it relevant to a discussion of MMT. Most PKs are left of center, and some are even socialists. They deplore the orthodox turn of a lot of mainstream Keynesians, whom they view as technicians of the business cycle not interested in deeper structural issues. They emphasize the importance of money and credit, particularly their destabilizing possibilities through speculative bubbles, far more than more mainstream sorts, who tend to believe the system is self-equilibrating and money exerts little mischief of its own.


One interesting strand of PK thought is endogenous money theory, which is the opposite of the monetarist theory made famous by Milton Friedman. Monetarists believe the central bank controls the money supply through its power to create and disseminate money via the banking system: the Fed injects cash into the financial system by buying Treasury bonds from private holders (not from the Treasury itself) and then banks are free to lend this newborn monetary hoard. Endogenous money theorists, in contrast, believe that money creation is driven by demand for credit coming from private actors, like businesses and consumers. Banks make loans and then scramble to fund them. Most of the time, the central bank accommodates banks’ demand for fresh money by pumping funds into the financial system (except when it’s trying to provoke a recession by frustrating their lust for fresh reserves). For those who care, this endogenous money view is similar to Marx’s theory of money. It’s also consistent with the way many central bankers see things. In normal times, the central bank injects enough money into the system to keep the wheels of commerce spinning, but it’s not what generates the spin. The work of production and distribution does that.


MMTers junk a lot of the most interesting stuff about PK economics. Unlike Joan Robinson, an early contributor to the PK tradition, they rarely ask what she called “the greatest of all economic questions . . . what is growth for?” (Or, as she said elsewhere, “Now that we all agree that government expenditure can maintain employment we should argue about what the expenditure should be for.”) Inspired by Knapp’s chartalist theory, they minimize the role of private credit demand in driving the economy; like Friedman they believe the government drives the creation of money (Friedman through the central bank, MMT through federal spending). Wray, who once wrote a book on the topic, now dismisses endogenous money as a “trivial advance” next to MMT.


MMTers show a strange lack of interest in the specificity of capitalism — how production and distribution are organized, how demand for credit arises in the course of commerce, how people earn their living and under what conditions — and their rejection of earlier PK work on money renders nearly invisible any link between money and things or money and people (or people and things via money). Marx said a man carries his bond with society in his pocket, a recognition that money is one of our principal modes of social organization and control. Or, as Antonio Negri put it in one of his more lucid moments, money has only one face, that of the boss. If you don’t work and do as you’re told, you go broke and starve.


Through the fantasy of effortless keystroke money, all those relations of necessity and power supposedly get wiped away. But it’s not some imposed scarcity of money itself that produces those relations.

MAYBE YOU SHOULD THINK ABOUT TAKING SOME OF YOUR MONEY OUT OF CANADIAN BANKS ?
Here is why. Please watch the video. Thank You.




Benjamin

https://ritholtz.com/2019/03/how-fed...Big+Picture%29

How Fed Independence Came To Be


March 3, 2019 5:00pm by Barry Ritholtz

NPR
“In the years before 1951, the Federal Reserve took orders from the Treasury, and by extension, from the President. The President would request that interest rates remain low, and the Fed would oblige.


But this became a problem. Low interest rates are great for people to borrow money to buy stuff, and for businesses to grow and hire people. But low interest rates also drive up inflation. And a big part of the Federal Reserve’s job is to keep inflation low.


So the Fed decided it needed to reclaim its power. And on March 4, 1951 it finally did. The Fed was officially free. Sort of. On today’s show, how the Fed won its independence and then fought to defend it.”

Here is the podcast.

Planet Money #898: Happy Fed Independence Day

Source: NPR

KENNY MALONE, HOST:
Late last year, President Trump was making very strong statements about what the Federal Reserve should do, or more specifically, what the Fed should not do. He did not want the Fed to raise interest rates again.

NOEL KING, HOST:
Right. The day before the Fed met in December, the president tweeted that it was incredible that, quote, "the Fed is even considering yet another interest rate hike." Then, the next day, he warned the Fed not to, quote, "make yet another mistake."

MALONE: Presidents love low interest rates because they make it easy for people to borrow money, to buy stuff and for businesses to borrow and hire people. But low interest rates also drive up inflation, and part of the Federal Reserve's job is to keep inflation low.

KING: The day after Trump's tweet, Fed Chair Jerome Powell, who was appointed by President Trump, announced that the Fed had, in fact, raised interest rates. He did the opposite of what the president wanted him to do.

MALONE: The Federal Reserve is independent, and this is a phrase you will hear - Fed independence. And what happened in December - president saying, don't raise rates, and his Fed chair saying, we raised rates - that's Fed independence. And there is a story of how Fed independence came to be and a specific day that I am henceforth going to call Fed Independence Day. And good news, everybody. You've got three days. It's the fourth of March.

(SOUNDBITE OF CESAR GIMENO LAVIN AND GILES PALMER'S "OVER THE BORDER")

KING: Hello, and welcome to PLANET MONEY. I'm Noel King.

MALONE: And I'm Kenny Malone. Today on the show, the story of how the Fed got its independence and how it had to fight to keep it.

KING: And by fight, we mean literal fight. The president and his Fed chair got in a physical altercation.

MALONE: OK. Fed Independence Day, as I'm calling it, is because of what happened in this country on March 4, 1951.

KING: In the years before 1951, the Fed took orders from the Treasury, basically from the president. We were fighting World War II, and so when the president said to the Fed chair, you better set interest rates so it's cheap for the government to borrow money to pay for the war, the Fed said, yeah, OK.

MALONE: But after the war, inflation started rising. And the Fed chair said to the president, look; it is our job to deal with inflation. You need to let us raise interest rates. President Truman said no.

KING: And by early 1951, inflation had hit 21 percent. The price of everything that Americans bought was rising by 21 percent a year. So Truman finally gave in. On March 4, 1951, his Treasury Department agreed to leave the Fed alone. The Fed, not the president, would set interest rates for the country. The Fed was free - sort of.

MALONE: Yeah. This agreement was known as the Treasury-Fed Accord. And the Treasury-Fed Accord is not a law or even an official rule. This really was just a handshake deal. The president, at that moment, was agreeing to not mess with the Fed. So the real test would come when another president came in and decided, I don't like this agreement.
(SOUNDBITE OF ARCHIVED RECORDING)

LYNDON B JOHNSON: Bill, I just want to thank you for your most thoughtful and generous letter. And I appreciate it so much.

KING: This is President Lyndon B. Johnson. And this phone call happened just a few days after Johnson became president in 1963, which was just a few days after John F. Kennedy was assassinated.

MALONE: Johnson had been thrown into office, and so he started checking in with all the important people. And in this call, he is introducing himself to Fed Chair William McChesney Martin.

KING: What Johnson's saying in this call is, you're the expert. I'm here to listen.
(SOUNDBITE OF ARCHIVED RECORDING)

JOHNSON: Well, you just assume that you're starting with someone who doesn't know much about your shop. And then you start to tell me what I ought to know about it.

WILLIAM MCCHESNEY MARTIN: Well, I certainly will help in every way that I can, Mr. President.

JOHNSON: Well, I think you're a patriot, and I'm mighty glad you're around.

MALONE: As far as we know, this is the first call between President Johnson and Chairman Martin. Sounds cordial, but their relationship would deteriorate spectacularly. Well, Bob, why don't we just - why don't we start by having you introduce yourself?

BOB BREMNER: Sure. I'm Bob Bremner. I authored a book on William McChesney Martin. I have kind of a corner on William McChesney Martin. It's the only book out there.

KING: Bob's going to be our guide through the Lyndon B. Johnson-William McChesney Martin story. So here goes. Johnson and Martin were two very different types of people. Johnson was this tall, imposing guy raised in Texas.

BREMNER: Well, Lyndon Johnson had a reputation for being a manipulator. He remembered slights, he exchanged favors, and he played them like fiddles.

MALONE: He was a man who did all the things to get people to do what he wanted them to do.

BREMNER: That's correct.

KING: Bill Martin wasn't like that. A journalist once called him the happy Puritan. His father was in banking. Martin looked like a banker. He was skinny. He had rimless glasses. Later on in his life, he became friends and tennis partners with that biographer, Bob Bremner.

MALONE: Did Bill Martin ever tell you any jokes? Any jokes?

BREMNER: You know, not a joke teller. And I remember finding in his papers a file saying, humor, and it didn't have anything in it.
(LAUGHTER)

BREMNER: Honest to God.

MALONE: Well, is it true that William McChesney Martin loved more than anything in the world trying to explain the Federal Reserve to people?

BREMNER: Absolutely.

MALONE: Really?

BREMNER: Absolutely, yeah.

KING: What were some of the analogies or metaphors he used? What did he compare it to?

BREMNER: Probably the most famous was his comment that the Federal Reserve's role was really to take the punch bowl away just as the party got going.

MALONE: The punch bowl analogy - business journalists use this all the time. And the idea is low interest rates are like the booze at a party. And the Fed's job is to be the responsible adult, to raise interest rates - take the punch bowl away before the party gets out of hand - before inflation starts to take off.

KING: OK, so when Lyndon Johnson becomes president, Bill Martin was already the Fed chair. And one of the first things that Johnson does is to push a big package of tax cuts that Kennedy had been working on. Johnson told Congress that passing these cuts was a way to honor Kennedy. And it worked; the cuts passed.

MALONE: And then there were the two wars. Johnson inherited the Vietnam War from Kennedy, and then he got us in deeper. And at home, Johnson launched the War on Poverty. This is where Medicare and Medicaid came from, and tons of other social programs. So these two wars were expensive.

KING: Because of all this government spending, a lot of money was heating up the U.S. economy. Plus, people are getting these tax breaks, so it's getting even hotter. This is great for Johnson because people are happy, and Johnson wants, eventually, to be re-elected.

MALONE: But William McChesney Martin is watching all of this and thinking, huh. This is the kind of stuff the Fed needs to pay very close attention to because this kind of spending could very likely lead to inflation.
So he starts warning Johnson, we're in serious trouble. I think the Fed is going to need to raise interest rates. We are headed for, quote, "an inflationary mess."

KING: And Johnson is like, yeah, well, I've talked to other smart people, and, quote, "they don't agree with you."

MALONE: This is the classic fight. The Fed wants to raise interest rates because it's worried about the economy in the long run, and the president wants low interest rates because they are good for the economy now.

BREMNER: The stage was set for problems. So the question is, what can a Fed chairman do? And in this particular case, what did Martin do to try to telegraph the Fed's intent and the concerns the Fed had? So the one thing they can do is give speeches.

KING: So we have a frustrated Fed chair. And as it happens, he gets an elegantly timed invitation, which leads to, as far as we can tell, the worst commencement day speech in history.

MALONE: Yeah. Bill Martin gets invited to Columbia University to speak at the graduation day luncheon. So you can imagine campus is buzzing with bright-eyed kids in powder blue caps and gowns. And you know how commencement day speeches usually sound. They're all, "Oh, The Places You'll Go." That is not what Martin does.

KING: No. He starts his address not by saying, follow your dreams, or some such. He says, when economic prospects are at their brightest, the dangers of complacency and recklessness are greatest.

MALONE: And then he ups the ante by saying, we find disquieting similarities between our present prosperity and the fabulous '20s.

BREMNER: And here's a Federal Reserve chairman talking about, you know, we are in a situation today that is very much like the situation that led to the Great Depression. Now, what - that's pretty tough stuff.

MALONE: But what is he saying? Like, what is he saying to these kids exactly? Like, we're - if we're not careful...

BREMNER: No. He's really speaking to the president, and that's the problem for the kids.
(LAUGHTER)

MALONE: This moment, where the Fed chair is actually saying the words danger signals and Great Depression in the same speech, makes the front page of The New York Times the next day. The stock market plunges. And when President Johnson gets word of this, he is seething. He asks his attorney general, can I fire this guy?

BREMNER: And the attorney general disappointed him by saying, there's no way you can unseat him, except for cause. And unfortunately, policy differences do not constitute a cause. So, Mr. President, you're stuck with this man.

KING: A guy like Johnson - that must've been - that must've chafed.

BREMNER: Oh, I mean, nobody told Lyndon Johnson no.

KING: Yeah.

BREMNER: Nobody.

KING: Think about this now from Johnson's point of view. William McChesney Martin and the Fed have an enormous amount of power. They get to decide how much it's going to cost to get a mortgage or a student loan. A handful of technocrats in the Federal Reserve get to make those decisions, not me, the president of the United States, who is a representative of all the people. And to be fair, some people today feel exactly the same way. Why did these unelected technocrats get so much power?

MALONE: So after Bill Martin's Columbia speech, Johnson is furious. He gets on the phone and starts talking to people about his Fed chair - about Bill freaking Martin.
(SOUNDBITE OF ARCHIVED RECORDING)

JOHNSON: Hello.

JOE: Good morning.

JOHNSON: Hi, Joe (ph).

JOE: How are you?

MALONE: You'll hear Johnson in this call saying, like, I can't control Bill Martin. He has control of the board. I've met with him half a dozen times. I can't do anything.
(SOUNDBITE OF ARCHIVED RECORDING)

JOHNSON: But I've done everything I know how. Met with Martin half a dozen times. I haven't got control of that board. He's got control of it.

MALONE: So Johnson is livid, but he's starting to understand that Martin is going to do this. He's going to raise the interest rate. So instead of begging Martin not to, he begs Martin to wait - wait until Johnson can pass a budget in the new year - big priority for the president.

KING: And this is all happening in the fall of 1965. And Johnson slips into full manipulator mode. He's about to have surgery, and he even tries to use that as leverage.

BREMNER: Johnson was going in to have his gallbladder taken out. And he said, you wouldn't raise rates on me - would you, Bill? - while I'm in the hospital? And Martin said, oh, no, Mr. President. We'll wait until you're out.

KING: So Martin does wait, but he doesn't wait long. On December 3, Martin's Fed takes a vote on whether to raise the interest rate by half a percent, and they vote to do it.

MALONE: Johnson is at his Texas ranch recovering from surgery when he finds out what Martin has done.

BREMNER: He can't control him. He has worked as hard as he can. He's threatened. And yet, Martin has gone and done this. And he can't believe it.

MALONE: So Johnson summons Martin to the ranch. Martin flies down. He's called into Johnson's office. We don't know exactly what was said in that office, but here is Bob Bremner's description.

BREMNER: And Johnson is just fit to be tied, starts right off. You know, this is something that can affect my entire term. You knew that this would have this impact on me, and yet, you went right ahead. You ran a rapier right through me. You and the Federal Reserve have put yourself above my presidency. And you totally disregard my wishes and my policy goals. It's a despicable thing to do.
And then there is a reference to the fact that Johnson was so angry that he pushed Martin against the wall.

MALONE: Physically pushed him against the wall?

BREMNER: Physically pushed him against the wall.

MALONE: The president of the United States...

BREMNER: Yes.

MALONE: ...Laid hands on...

BREMNER: Yes.

MALONE: ...His Fed chair?

BREMNER: Yes.

MALONE: And what does Martin do?

BREMNER: Well, Martin says, Mr. President, we have not put ourselves over your presidency. I told you I was going to do this. I told you personally. I told your administration that we were going to do this. I've given you a lot of advance notice. But I do have the very strong conviction that the Federal Reserve Act placed the responsibility for interest rates with the Federal Reserve Board. This is one of those few occasions where the Federal Reserve decision has to be final.

KING: This is a huge moment. And here's why. Remember Fed Independence Day - March 4, 1951? That Treasury-Fed Accord was really just a handshake deal. This moment tested the handshake deal. William McChesney Martin is standing up to Lyndon B. Johnson and saying, no, this agreement is real. The Fed is not going to be bullied into doing what the president wants.

BREMNER: Yeah. I mean, if you want one single moment when the Federal Reserve defined its independence and what that meant to somebody who was out to squash it as much as possible, that's it.

KING: The thing about Fed Independence Day is that it's really not just one day. There's the Treasury-Fed Accord - the fourth of March. There's the day Johnson shoved Martin for acting independently - the sixth of December. And it didn't stop there.

MALONE: In the years after Martin left the Fed, inflation started going way up until another Fed chair, Paul Volcker, had to assert Fed independence again. He raised interest rates even though farmers were blockading the Fed with their tractors.

KING: And then, in a smaller way, we saw this again in December when the president of the United States sort of warned his Fed chair, Jerome Powell, on Twitter not to raise interest rates, and Powell and the Fed did it anyway.

MALONE: It may sound like we're saying, maybe every day is Fed Independence Day. But, no, it is the fourth of March. And after the break, I have some very serious thoughts about how to celebrate.

KING: He does. You're going to want to stick around until after the credits.
(SOUNDBITE OF TIMOTHY PAUL HANDELS' "RETROSPECTIVE")

MALONE: All right, Noel King, I just want to try something that I've always sort of dreamed of.

KING: Shoot.

MALONE: OK, so you know how on the Fourth of July, for Independence Day, NPR has a bunch of its hosts read the Declaration of Independence on the air with, like, sweet music underneath?

KING: Yeah, I've done it.

MALONE: You've done it. For the fourth of March, for Fed Independence Day, we should be reading the Treasury-Fed Accord, the Fedcleration of Findependence, if you will.

KING: No, I will not.

MALONE: OK, we won't. But I do think we should go get the old document that was released on March 4, 1951, announcing the Treasury-Fed Accord. And I think what we should do is we should get the other hosts and get that sweet music and have them read this NPR-style.

KING: All right. I'm in. Let's do it.
(SOUNDBITE OF MUSIC)

MALONE: OK, this is super wonky, but here goes. (Reading) The Treasury and the Federal Reserve System...

KING: Have reached full accord with respect to debt-management...

NICK FOUNTAIN, BYLINE: And monetary policies to be pursued in furthering their common purpose...

RACHEL COHN, BYLINE: To assure the successful financing of the government's requirements...

JACOB GOLDSTEIN, BYLINE: And...

SARAH GONZALEZ, BYLINE: At the same time...

AILSA CHANG, BYLINE: To minimize monetization of the public debt.

MALONE: That's it.

KING: That's it.

MALONE: It's one sentence.

KING: Kind of confusing.

MALONE: It was basically a press release. But I am going to propose that henceforth, we shall read the Treasury-Fed Accord release every March fourth on PLANET MONEY, or as close as we can get to it. What do you think, Noel?

KING: Good.

MALONE: Yeah?

KING: Let's do it.

MALONE: All right.
(SOUNDBITE OF JULIEN PECLERS AND PHILIPPE BALZE'S "VENICE BAR")

MALONE: But we also have been trying to come up with a ritual for everyone else to celebrate Fed Independence Day, and we would like your help. We're looking for something.

KING: Yeah, something with a dollar bill maybe, something about how it holds buying power over time - maybe something with a punch bowl. Anyway, come up with a ritual, take a picture of it, put it on social media and tag us. We're @planetmoney. And we're going to put some of our favorites in our newsletter.

MALONE: You can also reach us by email. We are [email protected].

Today's episode was produced by Darian Woods and co-reported by Rachel Cohn. Today's show was edited by Jacob Goldstein. Alex Goldmark is our supervising producer. And Bryant Urstadt is PLANET MONEY's editor. A very, very, very special thanks this week to John Weinberg from the Federal Reserve Bank of Richmond for walking me through hours and hours and hours of the Fed's history. And the full name of Bob Bremner's book is "Chairman Of The Fed: William McChesney Martin Jr. And The Creation Of The Modern American Financial System."

And, Noel, by the way, I'm not joking about Fed Independence Day. I want this to happen. I want our audience to celebrate it.

KING: I believe you.

MALONE: Yeah, I know you do. My concern is that other people don't think I'm serious. And so I thought, Noel, we need a special greeting from the right person.
Go. Go ahead.

JANET YELLEN: This is Janet Yellen, former chair of the Board of Governors of the Federal Reserve. I want to wish everybody a very happy Fed Independence Day. Thank you for trusting the Federal Reserve and me with the privilege and the responsibility of conducting your monetary policy.

MALONE: Beautiful. Happy Fed Independence Day to you.

YELLEN: Same to you.

MALONE: Take care. Thank you.

YELLEN: You, too. Bye.


Copyright 2019 NPR. All rights reserved. Visit our website terms of use and permissions pages at www.npr.org for further information.
NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

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https://www.armstrongeconomics.com/i...-aocs-threats/

Will the Democrats Split into Two Parties after AOC’s Threats?

115
Blog/Politics

Posted Mar 4, 2019 by Martin Armstrong

https://d33wjekvz3zs1a.cloudfront.ne...sio-Cortez.jpg

The Democrats cheered the election of Alexandria Ocasio-Cortez (AOC) for they were sure that they were now going to be the party of the millennials. However, there is a growing division with the Democratic Party that for the first time may see itself fracture and divide as was the case when it split from the Democratic-Republican Party becoming the Democrats v the Republicans over slavery.


The list of Democratic presidential candidates keeps growing, and with them the promises seem to grow ever more robust. The Democrats have really been a party of coalitions between groups that always cast themselves as victims be it minority races, gender, or class. These traditional coalitions are being confronted by not just expanded entitlement spending to guarantee new welfare benefits, but with structural changes being demanded under this Green New Deal.
https://d33wjekvz3zs1a.cloudfront.ne...re-for-All.jpg


We have the promises of Massachusetts Sen. Elizabeth Warren who has endorsed a universal federal provision of childcare to be paid for by a 3% wealth tax. Then there is Vermont Sen. Bernie Sanders who proposes “Medicare for All.” Then there is Andrew Yang who fears AI and robots will replace everyone so that leads to the universal basic income proposition. Sure, Medicare for all sound fantastic. But it would be further subsidization of the medical industry. Socialized medicine in other countries works to some extent because the doctors are government employees like we have here in the VA hospitals. It is not remotely possible without nationalizing hospitals.
https://d33wjekvz3zs1a.cloudfront.ne...l-1024x298.jpg


Meanwhile, we have Senators Cory Booker, Kamala Harris, Kirsten Gillibrand, and yet others who have all backed the Green New Deal, which promises to address climate change and inequality by providing universal health care and creating millions of jobs by taxing the rich who creates the jobs. Then there are rumblings again that all blacks are entitled to reparation payments because their ancestors were sold as slaves by the Dutch. All of a sudden, there are divisions appearing between the traditional groups of race, gender, and class.


Based upon reliable inside sources, from the halls of Congress to the presidential campaign trail, Democratic moderates are beginning to push back against the wave of liberal energy and shoot-the-moon policy ideas that have captured the party’s imagination over the past two months.

The Democratic-Republican Party split into two parties following the 1824 presidential election. The leaders of the two major factions of the party, Andrew Jackson and John Quincy Adams, were both nominated for president. Other Democratic-Republican Party support went to William H. Crawford and Henry Clay. Finally, on February 28th, 1854, the Republican Party was founded in Ripon, Wisconsin.
https://d33wjekvz3zs1a.cloudfront.ne...gan-Button.jpg


What is interesting is that three waves of 51.6-years brought us to 1979 and the Reagan Revolution in politics with the slogan – let’s make America Great Again. Reagan was reversing the socialism of high taxes and high regulation. Of course, the next wave brings us to 2030. From the 1854 political split, we arrive at 2009. Besides picking the low in the economy and stock market crash from 2007, this turning point marked what many called the Second Republican Revolution.
Normally, the sitting president’s party usually loses congressional, statewide, and local seats during the midterm elections as Trump just experienced. However, the 2010 midterm election featured some of the biggest losses since the Great Depression. The Republican Party captured a majority in the U.S. House of Representatives, gaining 63 seats compared to Trump’s loss of 40 seats. The 2010 midterm election was the largest single-election shift in House seats since 1948 and the largest midterm election shift since the 1938 midterm elections against FDR. Republicans also gained six seats in the 2010 midterm U.S. Senate and 680 seats breaking the previous majority record of 628 set by Democrats in the post-Watergate elections of 1974. Clearly, the 2010 midterm election was reasonably named the Second Republican Revolution.


Of course, Abraham Lincoln won the presidential election on November 6th, 1860. Three waves of 51.6-years brought us to about 2015. That merely confirmed our model on political trends which forecast back in 1985 that the first time we would see a potential third party win would be 2016. The beginning of this Private Wave was 1985.65 and the Pi Turning point was also 2017.05. This pinpointed virtually the day Trump was sworn in.
https://d33wjekvz3zs1a.cloudfront.ne...y-1024x622.jpg


They worry that the sweeping proposals and hardball tactics of liberal firebrands could alienate centrist voters in the 2020 election, even as they hold out hope that Democratic primary voters, focused on defeating President Trump, will check the party’s move to the left.

The moderates’ concerns came to a head this week when one of the newest Democratic stars appeared to threaten colleagues who would not toe the liberal line, raising the specter of a fracture in the party between moderates and purists, similar to a long-standing divide in the Republican Party.

Any way we slice and dice these numbers, they are all pointing to the same outcome — a rise in third-party activity. That also applies to the Democratic Party. There are serious fissures emerging behind the curtain that I doubt CNN would report. This movement that is beginning to fracture the Democrats is actually being instigated by AOC (Alexandria Ocasio-Cortez (D-N.Y.)) There are threats being made behind the scenes that some of her colleagues could find themselves “on a list” of primary election targets if they do not support her and especially following anyone who voted for a Republican amendment that required undocumented immigrants who try to buy guns to be reported to U.S. Immigration and Customs Enforcement.


One group that is making such threats are known as the Justice Democrats, who are a liberal group that backed AOC primary campaign. They are attempting to dictate to the entire Democratic Party that it is their way or they will fund people to replace them. This is what Boehner was doing to Republicans who would back the Tea Party Conservatives. The power has gone to the head of AOC and she clearly thinks all the attention she is getting means she should be in charge. She was born October 13th, 1989 so she will be 35 just a few weeks from the Presidential election in 2024 for which they are preparing.


By turning Democrats against Democrats, the risk of a split is very high. These latest tactics are creating a Nixonian type of hit-list. She is really behind this demand of unification for her Green New Deal. Imposing this sort of political test is not only anti-Democratic insofar as individual candidates cannot stand for something different, but this sort of dictatorship will lead to a Democratic version of the Conservative Tea Party rebellion that transformed the GOP and kicked Boehner to the curb.
https://d33wjekvz3zs1a.cloudfront.ne...P-1024x574.jpg


The Tea Party surge brought Republicans new energy and new voters, but it’s also cost the GOP some congressional races and legislative victories. It also set the stage for the rise of Trump. The Fox poll that was shocking since it showed that the new voters who rallied to the GOP were not there for politics as usual. This poll illustrates the tendency for the rise of 3rd parties and the end of the 2-party system.

Many Democrats who have entered as presidential candidates have quickly endorsed these sort of sweeping leftist policies, including a Medicare-for-all health plan, a “Green New Deal” to combat climate change, and even reparations for African Americans. They seem to be willing to just go with the flow and promise whatever seems popular at the moment.

There are older Democrats who are becoming very concerned that U.S. politics has become hostile. I fail to see how we can now return to a more civil place as politics used to be. You accepted the vote and moved on. Those days seem to be history now.

The Republicans had their extremists known as the House Freedom Caucus, which opposes legislative compromises. The Democrats under AOC appear to be adopting these sort of tactics demanding compliance with their vision or else. They are arguing that the Democratic Party has become timid and it needs to be bold. They are pointing to the surge of new voters in the midterm elections as their proof that they should lead.
https://d33wjekvz3zs1a.cloudfront.ne...-AOC-votes.jpg


However, as I have just shown, that surge was normal and by no means historic. This perception that the Democratic Party’s primary voters are enthusiastically liberal and will support AOC is not based on data. Even AOC’s election was over 40,000 votes less than the incumbent won during the previous election. The number just do not support her. There is no way that AOC represents the majority of Democrats. About 50% of the Democrats identify themselves as moderate — not leftist or extremists. Thirty-three of the 40 GOP seats that Democrats picked up were won by candidates who had been endorsed by the moderate NewDem PAC – not the Justice Democrats.


The centrists Democrats are deeply concerned that these people have more power online and among the grassroots than they actually have at the ballot box. They comfort themselves saying this is just a fad and it will pass. Of course, the Republicans said the same thing about Trump.

A November Gallup poll found that 54% of Democrats were actually Democratic-leaning independents who wanted the party to become “more moderate,” while only 41% wanted it to be more left. That contrasted with the Republicans and their allies, 57% of whom wanted a more conservative party with less government and lower taxes.
https://d33wjekvz3zs1a.cloudfront.ne...m-1024x503.jpg


Meanwhile, the most startling Gallup Poll to date taken on Feb 18th, 2019, after the midterm elections, reported that 35% of Americans now believe that government/leadership is the top problem facing the country. Only 11% cited Donald Trump while 18% cited gridlock.

While this is a battle to impose a leftist agenda and the sensational questioning of Trump’s former personal lawyer has all been about scoring points for 2020, it merely promotes more gridlock and a diversion from actually managing the country. But the AOC contingency argues behind the curtain that without them, there is no Speaker Pelosi. They want the Michael Cohen hearing in hopes of winning more seats in 2020.

If you pay close attention, you will see that House Speaker Nancy Pelosi (D-Calif.) has been dancing between the raindrops treading carefully. She has avoided comments on the most sweeping liberal proposals and has been playing down prospects of a Trump impeachment. She is smart enough to see the warning signs that the Democratic Party can be torn apart. She has been scheduling weekly meetings in an effort to try to bring leaders together from both the moderate and liberal factions.


The stress signs are shows after 26 Democratic moderates joined with Republicans to pass an amendment on a key gun-control bill. Pelosi had actually said they should show more “courage” on politically sensitive votes. Meanwhile, AOC tweeted that she was not making threats but warning that the Democratic defectors “were inadvertently making a list of targets for the GOP and for progressive advocates” by voting with Republicans.


The power-plays are in. The dice are being rolled. The Democrats are beginning to wonder if there a political coup in the wind from this new upstart from New York. Looks like we have entered the 9th circle of hell in politics.

In 2020, President Trump and nearly two dozen GOP senators will face reelection. The battle lines are being drawn for this is going to be a contest between basic conservative to middle-ground principles against the rise of socialism and authoritative government. Thus, the 2020 election indeed appears to be on schedule for one of the most violent political confrontations since 1968.


Categories: Politics
Tags: 2020 Presidential Election, Democratic Party Split

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Good Morning Benjamins, yesterday I made $1300.00+, in four transections, the 5the one, I closed it by mistake. see below:-

Ticket Account Symbol Amount S/B Open Close P/L Gross P/L Roll Net P/L Open Time Close Time
67573755 01045760 SPX500 100 S 2,814.85 2,809.92 49.3 493.00 0.00 493.00 2019-03-03 20:16 2019-03-04 05:00
67573752 01045760 US30 100 S 26,134.50 26,099.20 35.30 353.00 0.00 353.00 2019-03-03 20:13 2019-03-04 05:00
67574025 01045760 US30 100 S 26,174.50 26,099.20 75.30 753.00 0.00 753.00 2019-03-03 22:44 2019-03-04 05:00
67573758 01045760 Copper 100 S 2.9378 2.9298 8 80.00 0.00 80.00 2019-03-03 20:19 2019-03-04 03:05
67573802 01045760 US30 100 S 26,138.60 26,174.40 -35.80 -358.00 0.00 -358.00 2019-03-03 20:45 2019-03-03 22:43
Total 132.10 1,321.00 0.00 1,321.00

Excellent !!! I will call you later today. Good Work !!! Please post feedback here on my thread and tell me what has allowed you to do so well now that I have explained to you about what I have been doing for the last 16 years to reach my proven level of excellence.

You made your first Forex trade using my Money Flow Method with Risk Management and your total Forex trades are now 10.

Of those 10 trades you have won 90% of them. Your Return on Investment in less than one week is over 8%. I consider that beyond excellent. I strongly suggest that you just might have what it takes to become very wealthy. I could under certain conditions arrange $50,000 US Dollars for you to trade with under Limited Power of Attorney. We can discuss it further when I call you. Of course you would need to keep trading this account for another 30 days so that we can see your final results after 30 days of Forex trading.

You would need to find some small working capital funds to get all this going and again we can discuss this when I call you.


Benjamin

https://www.zerohedge.com/news/2019-...ops+to+zero%29

Authored by Lance Roberts via RealInvestmentAdvice.com,
Earlier this month, I penned an article asking if we “really shouldn’t worry about the Fed’s balance sheet?” The question arose from a specific statement made by previous New York Federal Reserve President Bill Dudley:
“Financial types have long had a preoccupation: What will the Federal Reserve do with all the fixed income securities it purchased to help the U.S. economy recover from the last recession? The Fed’s efforts to shrink its holdings have been blamed for various ills, including December’s stock-market swoon. And any new nuance of policy — such as last week’s statement on “balance sheet normalization” — is seen as a really big deal.
I’m amazed and baffled by this. It gets much more attention than it deserves.”


As I noted, there is a specific reason why “financial types” have a preoccupation with the balance sheet.
https://zh-prod-1cc738ca-7d3b-4a72-b...%20%281%29.png


The preoccupation came to light in 2010 when Ben Bernanke added the “third mandate” to the Fed – the creation of the “wealth effect.”


“This approach eased financial conditions in the past and, so far, looks to be effective again. Stock prices rose and long-term interest rates fell when investors began to anticipate this additional action. Easier financial conditions will promote economic growth. For example, lower mortgage rates will make housing more affordable and allow more homeowners to refinance. Lower corporate bond rates will encourage investment. And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.”
– Ben Bernanke, Washington Post Op-Ed, November, 2010.


As he noted, the Fed specifically targeted asset prices to boost consumer confidence. Given that consumption makes up roughly 70% of economic growth in the U.S., it makes sense. So, not surprisingly, when the economy begins to show signs of deterioration, the Fed acts to offset that weakness.

This is why the slowdown in global growth became an important factor behind the central bank’s decision to put plans for interest rate increases on hold. That comment was made by Federal Reserve Vice Chairman Richard Clarida during a question-and-answer session last week.

“The reality is that the global economy is slowing. You’ve got negative growth in Italy, Germany may just grow…1% this year, [and] a slowdown in China. These are all things that we need to factor in.

Slower global growth would crimp U.S. exports and could also negatively influence financial and asset markets, a primary transmission mechanism for monetary policy.”

As we noted previously in “Data or Markets,” the Fed is not truly just “data dependent.” They are, in many ways, co-dependent on each other. A strongly rising market allows the Fed to raise rates and reduce accommodative as higher asset prices support confidence. However, that “leeway” is quickly reduced when asset prices reverse. This has been the Fed cycle for the last 40-years.


The problem for the Fed is they have now become “liquidity trapped.”

What is that? Here is the definition:
“A liquidity trap is a situation described in Keynesian economics in which injections of cash into the private banking system by a central bank fail to lower interest rates and hence fail to stimulate economic growth. A liquidity trap is caused when people hoard cash because they expect an adverse event such as deflation, insufficient aggregate demand, or war. Signature characteristics of a liquidity trap are short-term interest rates that are near zero and fluctuations in the monetary base that fail to translate into fluctuations in general price levels.”

The chart below shows the correlation between the decline of GDP and the Fed Funds rate.
https://zh-prod-1cc738ca-7d3b-4a72-b...nal-022619.png


There are two important things to notice from the chart above. The first is that prior to 1980, the trend of both economic growth and the Fed Funds rate were rising.

Then, post-1980, as then Fed Chairman Paul Volker and President Ronald Reagan set out to break the back of inflation, each successive cycle of rate increases were started from a level lower than the previous cycle.

The difference between the two periods was the amount of debt in the system and the shift from an expansive production and manufacturing based economy to one driven primarily by services which have a substantially lower multiplier effect. Since 1980, it has required increasing levels of debt to manufacture $1 of GDP growth.
https://zh-prod-1cc738ca-7d3b-4a72-b...h-020519_0.png


In every case, the rate cycle increase ALWAYS led to either a recession, bear market, crisis, or all three. Importantly, those events occurred not when the Fed STARTED hiking rates, but when they recognized that their tightening process was confronted by weakening economic growth.


The Trap
The problem for the Fed is that while lower interest rates may help spur economic growth in the short-term, the growth has come from an increasing level of debt accumulation. Therefore, the economy cannot withstand a reversal of those rates. As shown above, each successive round of rate increases was never able to achieve a rate higher than the previous peak. For example, in 2007, the Fed Funds rate was roughly 5% when the Fed started lowering rates to combat the financial crisis. Today, if the Fed started lowering rates to combat economic weakness, they would do so from less than half that previous rate.


As Richard Clarida noted in his speech, one of the potential risks to Central Banks globally is the lack of monetary policy firepower available. We previously pointed out that in 2009, the Fed went to work to rescue the economy with a $915 billion balance sheet and Fed Funds at 4.2%. Today, that balance sheet remains above $4 trillion and rates are at 2.5%.


It isn’t lost on the Fed that if a recession were to occur, their main lever for stimulating economic activity, interest rate reductions, will have little value. Given the amount of debt outstanding and the onerous burden of servicing it, the marginal benefit of lower rates will likely not be enough to lift the country out of a recession. In such a tough situation the next lever at their disposal is increasing their balance sheet and flooding the markets with liquidity via QE.


However, even that may not be enough as both Ben Bernanke and Janet Yellen have acknowledged that they were aware that each successive round of QE was somewhat less effective than the last. That certainly must be a concern for Powell if he is called upon to re-engage QE in a recession or another economic crisis.

For the Federal Reserve, they are now caught in the same “liquidity trap” that has been the history of Japan for the last three decades. One only needs to look at Japan for an understanding that QE, low-interest rate policies, and expansion of debt have done little economically. Take a look at the chart below which shows the expansion of the BOJ assets versus the growth of GDP and levels of interest rates.
https://zh-prod-1cc738ca-7d3b-4a72-b...s-101118_1.png


Notice that since 1998, Japan has not achieved a 2% rate of economic growth. Even with interest rates still near zero, economic growth remains mired below one-percent, providing little evidence to support the idea that inflating asset prices by buying assets leads to stronger economic outcomes.
But yet, the current Administration believes our outcome will be different.


With the current economic recovery already pushing the long end of the economic cycle, the risk is rising that the next economic downturn is closer than not. The danger is that the Federal Reserve is now potentially trapped with an inability to use monetary policy tools to offset the next economic decline when it occurs.

This is the same problem that Japan has wrestled with for the last 30-years. While Japan has entered into an unprecedented stimulus program (on a relative basis twice as large as the U.S. on an economy 1/3 the size) there is no guarantee that such a program will result in the desired effect of pulling the Japanese economy out of its 30-year deflationary cycle. The problems that face Japan are similar to what we are currently witnessing in the U.S.:

1. A decline in savings rates to extremely low levels which depletes productive investments
2. An aging demographic that is top heavy and drawing on social benefits at an advancing rate.
3. A heavily indebted economy with debt/GDP ratios above 100%.
4. A decline in exports due to a weak global economic environment.
5. Slowing domestic economic growth rates.
6. An underemployed younger demographic.
7. An inelastic supply-demand curve
8. Weak industrial production
9. Dependence on productivity increases to offset reduced employment

The real concern for investors, and individuals, is the actual economy. We are likely experiencing more than just a ‘soft patch’ currently despite the mainstream analysts’ rhetoric to the contrary. There is clearly something amiss within the economic landscape and the ongoing decline of inflationary pressures longer term is likely telling us just that. The big question for the Fed is how to get out of the ‘liquidity trap’ they have gotten themselves into without cratering the economy, and the financial markets, in the process.


The One Thing
However, the one statement, which is arguably the most important for investors, is what Bill Dudley stated relative to the size of the balance sheet and it’s use a tool to stem the next decline.
“The balance sheet tool becomes relevant only if the economy falters badly and the Fed needs more ammunition.”


In other words, it will likely require a substantially larger correction than what we have just seen to bring “QE” back into the game. Unfortunately, as I laid out in “Why Another 50% Correction Is Possible,” the ingredients for a “mean-reverting” event are all in place.


“What causes the next correction is always unknown until after the fact. However, there are ample warnings that suggest the current cycle may be closer to its inevitable conclusion than many currently believe. There are many factors that can, and will, contribute to the eventual correction which will ‘feed’ on the unwinding of excessive exuberance, valuations, leverage, and deviations from long-term averages.

The biggest risk to investors currently is the magnitude of the next retracement. As shown below the range of potential reversions runs from 36% to more than 54%.”
https://zh-prod-1cc738ca-7d3b-4a72-b...%20%281%29.png


“It’s happened twice before in the last 20 years and with less debt, less leverage, and better-funded pension plans.

More importantly, notice all three previous corrections, including the 2015-2016 correction which was stopped short by Central Banks, all started from deviations above the long-term exponential trend line. The current deviation above that long-term trend is the largest in history which suggests that a mean reversion will be large as well.

It is unlikely that a 50-61.8% correction would happen outside of the onset of a recession. But considering we are already pushing the longest economic growth cycle in modern American history, such a risk which should not be ignored.”


While Bill makes the point that “QE” is available as a tool, it won’t likely be used until AFTER the Fed lowers interest rates back to the zero-bound. Which means that by the time “QE” comes to the fore, the damage to investors will likely be much more severe than currently contemplated.


Yes, the Fed absolutely targets the financial markets with their policies. The only question will be what “rabbit” they pull out of their hat if it doesn’t work next time?

I am not sure even they know.


COMMENTS FROM BENJAMIN: Unfortunately for ALL of us humans on the planet called Earth these MAD Men and Women have conspired to destroy our financial systems whether intentional or not we all need to deal with it.

Who is responsible for this most incredible mess that will doom the world as we know it today to very dark days in the future. I will conclude my comments to tell you who caused this to happen. The 100 members of the USA Senate and the 435 Members of The House of Representatives and of course the President.

Now for the bottom line. It was not the present representatives of the people or the current President that created this terrible situation.

It is the politicians starting with those involved on December 23, 1913 when for the third time is the history of the USA the third National Federal Reserve was created.

Then we move forward to President Richard Milhous Nixon who on August 15, 1971 removed the Gold backing of the US Dollar.

Then we again fast forward to President Bill Clinton and all the members of the Senate and the House of Representatives that allowed in 1999 the removal of the Glass Steagal Act of 1933.

So then we move to the year 2008 and the most serious meltdown of the financial system with the INFAMOUS TARP program first defeated then put in place when the Stock Market collapsed. Now we have arrived at today. Please prepare yourself for very very dark days ahead for all of us.

thanks for your kind words of encouragement.

http://www.whatdoesitmean.com/index2803.htm


March 4, 2019
Top US-Russian Military Leaders Hold Emergency Meet In Vienna As Feared American “Action” Nears

By: Sorcha Faal, and as reported to her Western Subscribers

A distressing new Ministry of Defence (MoD) report circulating in the Kremlin today states that barely 48-hours after Russian forces were put on alert in response to new fears of President Trump being assassinated, General Staff of the Armed Forces Valery Gerasimov has arrived in Vienna-Austria to hold an emergency meeting urgently requested by US Chairman of the Joint Chiefs of Staff General Joseph Dunford—during which the main topic for discussion will be an explanation of the “action” [воздействие] [Note: a movement or natural process: e.g. “The rocks are smoothed by the action of water”]intended to be taken by the Americans to stop their nation’s radical socialists before they ignite a war—a critical measure needed as “Deep State” leader Hillary Clinton has just ordered her Democrat Partyallies in the US Congress to continue pursuing Russia collusion, even if Special Counsel Robert Mueller comes up empty in his soon to be released report—and whose radical leftist followers, yesterday, paraded on the Hollywood star of Donald Trump a group of dog-leashed white men wearing MAGA hats as a vile tactic to incite the anger of all who support their nation’s leader. [Note: Some words and/or phrases appearing in quotes in this report are English language approximations of Russian words/phrases having no exact counterpart.]

http://www.whatdoesitmean.com/wark1.jpg

http://www.whatdoesitmean.com/wark2.jpg

Radical socialist-led Hillary Clinton supporters parade dog-leashed white men wearing MAGA hats on 3 March 2019 to horror of President Trump supporters

According to this report, the most catastrophic and disastrous event in the entirety of Russian history was the 23 August 1939 signing of the Molotov–Ribbentrop Pact—that was a non-aggression agreement between the world’s two leading socialist nations, the Soviet Union and the National Socialist German Workers' Party (aka Nazi Party).

Following the signing of this non-aggression pact between the world’s top two socialist nations, this report continues, Germany invaded Poland a fortnight later on 1 September 1939—followed 16-dayslater, on 17 September 1939, by the Soviet Union, likewise, invading Poland—with the purpose being for this invasion the forced imposition of socialism upon the entire European continent.

Seeking to split the socialist world into two parts, this report details, on 3 September 1939 the Western powers of Britain and France declared war on Germany for their invasion of Poland—but not on the Soviet Union who did the exact same thing—a perplexing circumstance puzzled over by Soviet leader Joseph Stalin, but who unquestionably believed that Germany would never attack its socialist “brother” the Soviet Union.

On 22 June 1941, though, this report notes, Soviet leader Stalin learned first hand how truly treacherous and deadly socialist maniacs (like he was, too) are when Germany launched an unprovoked invasion on the Soviet Union—a conflict that became part of World War II—and by its end in 1945, saw the deaths of nearly 30 million Russian peoples.

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Knowing how dangerous godless socialism is, this report continues, President Putin, who declared “whoever does not miss the Soviet Union has no heart...but whoever wants it back has no brain”, remadeRussia into a Christian theocracy—now called the “Truimph of Christianity in Russia”—and is a form of government in which religious institutions are the source from which all authority derives—and whose counterpart for the Jewish religion is Israel, for the Shiite Muslims is Iran, and for Sunni Muslims is all of their nations.

Religious theocracy ruled nations like Russia, this report explains, are the most hated and reviled by socialists (and is why Russia, Israel, Iran Saudi Arabia, Syria and Turkey are under continued socialist attacks)—who detest to their very core anything and anyone having more power than them, especially God, whom they don’t even believe exists—and is why Putin warned these Western socialists that he is not even close to being like Stalin, and declared to them: “Fifty years ago, the streets of Leningrad taught me one thing: If a fight's inevitable, you must strike first”.

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At this exact point in time, this report details, the greatest existential threat to Russia is if the radical godless socialists in the United States can take power—which if should happen, would immediately call for an all-out nuclear attack on America before these socialists do the same to the Motherland—and who have already, and unmistakably, stated that they intend to declare war on Russia for the made up crime of interfering in their 2016 presidential election—that they have, also, hysterically likened to the Empire of Japan’s attack on Pearl Harbor that threw the United States into World War II.

In order to ascertain as to how close these radical socialists are to taking power in the United States, this report continues, President Putin tasked the Ministry of Economic Development (MoED) to find out—the findings of which were just released by Minister Maxim Oreshkin, who states that President Trump will be re-elected for a second term in 2020, and then most likely replaced by a radical socialist left-wing Democrat—and whose further warnings state:
The Trump phenomenon is not a coincidence, but is a direct aftermath of what is happening in the world whose main cause of was America’s shattered stability that was visible in its economic performance.

The rate of labor productivity over the past 10-15 years has substantially slowed down because the quality of human resources, and social mobility has actually worsened.
America has splintered into several various parts: New York, California, maybe Texas and several other major areas.
And then there is the rest of America, which turned out to be flyover country cast aside by that strata of society.

It’s clear that that part of the population, who lost out in this process, is dissatisfied. They are told now that China and Mexico, which snapped up their jobs, are entirely to blame for this.
However, Trump is addressing those problems, which truly concern the majority of citizens. That’s why even though he lost New York and California, the majority of voters cast their ballots for him,
Therefore, the likely political scenario in America is that Trump will be re-elected for a second term and later he will be replaced by a Democrat, who will be an extreme leftist.
I see this as the most probable scenario…otherwise; a left-wing Democrat could emerge now if America comes up against an economic crisis earlier than by the next election.

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To even contemplate that these radical American socialists would be so insane as to crash their own nation’s economy to defeat President Trump, this report concludes, no normal mind can absorb due to the horror and economic devastation it would throw upon the lives of tens-of-millions of innocent citizens who believe their leaders are supposed to protect them—but makes perfect sense to the demonic minds of the socialists who now control half of the US Congress—who, instead of their preparing to celebrate the fact that Special Counsel Mueller could find no evidence of Trump-Russia collusion, have launched themselves on a course to bring the entire US government to a standstill with their opening of an astounding 60 new investigations into Trump, his family, his friends and his businesses—none of whom have had anything close to credible accusations being made against them—but will, nonetheless, provide continued fodder for the vast socialist-led mainstream media establishment propaganda machine to hammer Trump with—but being unknown how much more he can take before he finally destroys them all—and that Russia will, most assuredly, do if he can’t.

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March 4, 2019 EU and US all rights reserved. Permission to use this report in its entirety is granted under the condition it is linked back to its original source at WhatDoesItMean.Com. Freebase content licensed under CC-BY and GFDL.

[Note: Many governments and their intelligence services actively campaign against the information found in these reports so as not to alarm their citizens about the manybucatastrophic Earth changes and events to come, a stance that the Sisters of Sorcha Faal strongly disagree with in believing that it is every human beings right to know the truth. Due to our missions conflicts with that of those governments, the responses of their ‘agents’ has been a longstanding misinformation/misdirection campaign designed to discredit us, and others like us, that is exampled in numerous places, including HERE.]


[Note: The WhatDoesItMean.com website was created for and donated to the Sisters of Sorcha Faal in 2003 by a small group of American computer experts led by the late global technology guru Wayne Green (1922-2013) to counter the propaganda being used by the West to promote their illegal 2003 invasion of Iraq.]
[Note: The word Kremlin (fortress inside a city) as used in this report refers to Russian citadels, including in Moscow, having cathedrals wherein female Schema monks (Orthodox nuns) reside, many of whom are devoted to the mission of the Sisters of Sorcha Faal.]

Hillary Clinton May Talk With Spirit Of Eleanor Roosevelt—But Longest Serving First Lady In History Rises From Grave To Protect Trump

http://themillenniumreport.com/2017/...jzR0nbPOQp2rlM

Benjamins! is it " RISK ON ", the whole day?? plz advise. thanks,

Why would it be RISK ON ALL ?

The Dow 30 is down over 350 points ? We have RISK OFF at the moment and you also need to know that now is not the time to SHORT as we could have a bounce back. I just went LONG 2500 ounces of Silver. Have a look at my SCREENSHOT which will be my next post.


Benjamin