End the Fed!

Cassandra of the Crash: An Interview With Former Dallas Fed Researcher Danielle DiMartino Booth

Q: Do you think Fed policy might have influenced the past few years' stock market run-up? 

A: Might? You can connect the dots. With the lowest interest rates in 5,000 years, you have companies borrowing to buy back shares and have earnings per share go up. It's mathematical. Thank you, Fed! 

DYI: Bingo…Zero to sub atomic growth in the economy and yet the market flies to insane valuations all to the tune of debt, debt, and more debt purchasing back stock driving earning per share profits higher.  A magician's trick of smoke and mirrors!

Yet what have they done in creating anything of lasting economic sustained growth? Look at productivity growth, and you'll see it's a whole lot of nothing. I'm not casting stones [at the companies whose stock price is going up]. They are behaving rationally in a world where central bankers are behaving irrationally.

Q: Is propping up Wall Street at the expense of Main Street a meaningful way to critique the past decade of Fed policy? 

A: Check the average yield on a certificate of deposit [and it's clear normal savers, who don't want to play the stock market, are in trouble].

DYI: Sub atomic low interest rates have crucified individuals who have no desire or temperament for stocks and/or bonds crushing their capacity to out pace inflation.  Retiree’s have long since given up the possibility of living off their interest income and have resulted in draw downs of principal – when exhausted are relegated to poverty.  In the Fed’s attempt to solve the economies problems they have created a systemic social problem – impoverished elderly – only terminated by death!      

Even if you take the garbled inflation metric the Fed uses that doesn't apply to anything on planet Earth, core CPI [Consumer Price Index, which doesn't count things like energy and food that most Americans spend a lot on], you see Main Street cannot be prudent in its investment decisions.

DYI: Lower middle class, working class, and working poor energy and food are a huge proportion of their spending [along with housing].  To remove this from the CPI is intellectually dishonest.  

 My 70-year-old retired mother asks, "Shouldn't I have something higher yield?" But I say, "Mom, you are 70, you are not getting junk bonds."

DYI: At this time period [1-23-18] of course not.  Not because junk bonds are always inherently bad the spread between junk and Treasuries is so narrow during a downturn would produce huge losses.  However, during an economic smash junk bonds [bought in a mutual fund such as Vanguard] yielding greater than 10% (1000 basis points plus) than Treasuries junk would move from a speculation to investment; and yes suitable even for a seventy year old!

Q: You make a bit of a joke in your book aimed at Ron Paul and his end/audit-the-Fed movement. 

A: My issue with Ron Paul is that if you install a political-agenda-free individual in leadership of the Fed, it won't need to be audited and will run itself appropriately.

DYI:  Oh please…And where are you going to find these angels in a sea of agenda filled devils??  There is only one way to end the devils work is by ending the Fed!  

People can be put into the position of leading the Fed who have been on the receiving end of Fed policy [as business people] and don't need it to be a shrine to [John Maynard] Keynes [the British economist associated with the idea that government often should borrow and spend to jump start economic growth]. There is not enough diversity in the way economics is approached inside the Fed, too much group think and too many academics.…Hire people who can read a balance sheet!

DYI:  Oh good Lord here we go again!  If we just have the right people and all will be glowing.  Balderdash, hogwash, full-blown twaddle!  The Fed from day one was put together institutionally to drive wealth into the elites hands – all devised by the mechanics of the Fed.  You could have every employee an angel in the mist of devils;  the outcome would be the same!       

[The real reform the Fed needs] is to take away its 1977 dual mandate [to keep both inflation and unemployment low]. Take it back to a single mandate to make the dollar in our wallet buy the same tomorrow as it does today, and call it a day.

DYI:  Real reform??  No only ending the Fed will accomplish that.  Ending the full employment mandate I would agree is a step in the right direction; ending our debt based system inflates profits for the New York City moneyed center banks all owned and controlled by elites.  End debt based currency economic recessions will be far less severe as a huge majority of corporations/citizens being debt free diminishes the effects of the business cycle.  Bring back a sound dollar, a non inflationary dollar our wealth inequality would be slashed significantly! 

DYI