The Fed giveth and the bullion banks taketh away
Janet Yellen just blew all remaining semblances of credibility believed to be still present at the U.S. Federal Reserve Board.
We have all heard for the past month or so that the Fed was going to hike the Fed Funds rate at today's meeting, the anticipation of which caused a rally in the U.S. Dollar (USD) and a surge in stocks—all while the bond market was rallying in response to weakness in the macroeconomic environment.
Well, they didn't raise as predicted back in March because of "China weakness," so today they didn't hike because of "soft exports" and "vulnerabilities in the global economy" and "Brexit worries" and a host of other totally clueless hypothecations. But the bottom line is that they didn't hike because the ensuing dollar rally would impair the collateral that underpins the massive debts owed by governments and homeowners to the banks that hold that debt. Stocks reversed lower when it became clear that the Fed has absolutely zero control over the U.S. economy, and is now truly caught in the headlights because banks are getting killed with the yield curve this "flat," and since the Fed's shareholders are "the banks," it takes on an aura of the surreal.
As long as I have been writing about markets (and that dates back to 1987), I have never ever had any respect for the banking industry. To think that in Canada, when you get your paycheck and after your employer has deducted taxes and benefits from it, you cannot get paid with cash. In my first job as a golf pro shop attendant ("club cleaner") in the 1960s, the club pro handed out little banker envelopes with cold, crisp bills inside. After stashing the bills in my jeans, I would take them home and stuff them in a Jumbo peanut butter jar until I had enough bills to open a bank account. Then I would go down to the bank with the Jumbo jar in a canvas sack and present it to the nicest teller I could find and she would count it out carefully, give me my receipt and update my bankbook. If I wanted to empty the entire account to buy a new pair of hockey skates or a new lacrosse stick from the Oneida First Nations (who made the best lacrosse sticks in the world), I could do so and still leave the account open and get a smile from the teller.
Today, try to get cash from your employer. Secondly, try to put cash into a bank these days. Third, try to get cash out of a bank (over $5,000) without signing a form that tells the government where you are going to spend your money. When they decide to eliminate cash transactions and go totally electronic, not only will they be able to trace your movements, they will be able to see what you buy, and when and where you buy it.
The freedoms lost during the last 50 years are going to only accelerate as the dynamic duo of babbling bankers and panicking politicians move to protect their unwarranted and fully undeserved positions of power ("POPs") by attempting to confiscate the earnings of citizens through taxation, the savings of citizens through bail-ins and the assets of citizens through some form of expropriation in the guise of an "Emergency Measures Act." Welcome to the world of the "New Normal" and 24-hour government surveillance.
When Janet Yellen started answering questions today, I suddenly had another Eureka moment, which have been coming with alarming regularity as the years on my birth certificate begin to pile up. That moment is the point in the interview or the chapter in the book where I call "Bullshit," and have to come to the realization that these deified morons called "central bank governors" are actually no smarter than my local barber, who has been a real estate investor for the past forty years and is now wealthy beyond belief.