Bob Corker Joins Chorus Seeking End To Fed's Mandate Seeking Maximum Employment

Tyler Durden's picture

Yesterday, while reporting on Michael Pense's interview with CNBC, we asked: "Are Republicans Preparing For A Push To Eliminate The "Maximum Employment" Part Of The Fed's Dual Mandate?" The answer, it appears, is yes. Bob Corker has just come out with a statement urging a change to the Fed's mandate, removing the entire "maximum employment" clause. This is possibly the biggest news for the Fed since 1977, and would effectively end the Fed's supreme reign over the US economy, as Bernanke will no longer have the fall back of keeping rates at zero just to get unemployment back to some imaginary number.

We will keep you posted on what could be the most imporant development of the century.

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spartan117's picture

Well, the Federal Government (and all State Governments) better be prepared to end all deficit spending.  Otherwise, who the hell is going to buy up all that debt?  China?  Japan?  I doubt it.

MachoMan's picture

Bingo.  The ability to deficit spend has been dead for quite some time.  Although it has been done, our prospective ability dwindles significantly by the day; the writing has been on the wall for a while.  All of the political winds in the country are for austerity.

Now, this will buy us an undetermined amount of time to plan for and implement additional cost cutting as well as attempt to increase tax revenue (we will default domestically before we default internationally, e.g. needs based tests for social security).  Ultimately, this process will end in a brick wall that attorneys affectionately refer to as the inability to "get blood from a turnip".  Or, the changes are so drastic and cuts so severe, that the populace revolts and we repudiate the debt prior to actual default. 

Austerity will only prolong the "controlled" demolition (which is why it is being pursued since that in turns continues to line the pockets of the principal actors).  I shudder to think who fills the power vacuum.

barkster's picture

Maybe this is a concession to derail "end the fed" talk.

MachoMan's picture

When an attorney speaks in court, he "builds the record".  Meaning, while everything is going on, he is reading the post-trial transcript in his head.  Some of the information the attorney builds is necessary for his case.  But, some of the information is also used for ancillary purposes, such as his appearance to the trier of fact or to overturn the case if necessary on appeal. 

Likewise, politicians build the record.  Just like Bill Gross and others have done, people are attempting to plant straws to grasp at after they fall off the cliff.  This essentially is no different.  The result sometimes is not as important as the appearance and implementation of facts for plausible deniability.  I'm not saying they get there, but they're also left with few options. 

cougar_w's picture

Agreed. Expect a lot more of these "arrows shot into the sky" as the end-game plays out.

And that's all it is folks; positioning near the exits for a final quick dash to the roof and the waiting helicopter.

midtowng's picture

The only mandate the Fed has is to protect their criminal banker friends. That's why all this talk about "full employment mandate" means absolutely nothing.

the not so mighty maximiza's picture

Might as well change the mandate since they suck at it anyway.

tom's picture

Given how freely the FOMC unilaterally re-wrote its "stable prices" mandate into "low, stable inflation", I have a hard time seeing how tweaking the wording of the mandate is going to be effective.

you enjoy myself's picture

that was my first thought too - Bernanke keeps targeting the goal of 2% inflation but never justifies it, directly, as a necessary component of maximum employment.  its just a random target of stable-ness.

clymer's picture

"Bob Corker Joins Chorus Seeking End To Fed's Mandate Seeking Maximum Employment"

Bob Corker is another FED mouth piece. Is the FED just angling to extend life to the dollar, providing more time to setup an international unit of exchange? Maybe they are running low on time before they see the fuse reaching the powder keg? Maybe the recognize that if they are given the wiggle room to hike rates a little it will buy enough time to consolodate buy in from the other sovereigns?

clymer's picture

or possibly just lip service to get the bwany fwanks in congress to start jumping up and down lika an organ grinders monkey, screaming about how unemployment is too high as it is, and we cannot change the FED's dual mandate..
I dunno, my head hurts trying to guage what makes these fuckers tick

MachoMan's picture

The process to extend the life of the dollar, austerity, is generally mutually exclusive with the process to pass the baton to a world currency, printing.  I know I harp on it a lot, but climategate will go down as one of the most important events for world politics of the last couple hundred years.  It basically reserved us to our dollar graves.  In short, any world currency must be backed by something, however anything of substance cannot be easily recreated, reproduced and mass printed.  As a result, the new currency would need to be backed by a manipulable pseudo commodity.  That pseudo commodity was to be carbon credits.  That lifeline is no longer available (they didn't even get the ball rolling with the BP spill).  We are reserved to our dollar fate.

What makes these guys tick is self preservation.  When it becomes politically palatable to turn coat and stab the establishment in the back, then so be it.  There is no honor among thieves. 

packman's picture

" That pseudo commodity was to be carbon credits. "

Interesting theory, but I'd be curious how you think that would work.  The idea of using a commodity (or basket of commodities) is that it's non-fiat; it's real and can be measured (albeit not without controversy).  Carbon credits can't even be theoretically measured or limted - they are still pure fiat.

 

MachoMan's picture

I think you've basically answered  your own question...  it never could work.  In a world where physical precious metals are demanded and fiat currency shunned, a fiat backed by another fiat is an exercise in futility.  But, it doesn't change the fact that it was the plan... 

In order for the baton to pass from the dollar to a world currency (the dollar is already THE world currency, but that issue aside) there would have to be a printable/creatable fiat backing.  This is the problem with credit expansion.  Eventually it meets the brick wall of resources capable of sustaining expansion.  Some motherfuckers are always trying to ice skate uphill.

Of course, the dollar has lasted this long...  what will "work" is not necessarily what will be crammed down our throats/accepted while we watch american idol.  It's all about increasing the longevity of the robbery before flipping the switch and laying claim to the prize through deflation.

barkster's picture

cool...may give us another shot at physical at lower prices!

goldmiddelfinger's picture

RepMikePence   

 

 

We need to get the Fed back in the business of focusing on price stability and preventing inflation http://wapo.st/d5VMR7

Tsunami Effect's picture

Every crash is always driven by the exact same thing.  LEVERAGE DESTRUCTION.

1929 - 10% margin + trade war and no act of 33 or 34 to prevent unscrupulous stock promoters convincing everyone to buy $10 of stock for only $1 of equity! 

1930 – leverage erased due to taxes on imported goods. 

1987 – portfolio insurance, derivatives, pending rate hikes led to an evaporation of leverage and 30% drop in five days. 

2008 -  Housing related leverage to sub-prime borrowers erased after decades of programs fostering home ownership for anyone!

 Here’s how its happening right now…

  1. QE2 – a hyper-inflationary disaster.  Look at every one from Bill Gross to the Chinese lining up to bash it.   -  the Fed Leveraging its balance sheet will be met with outside forces to counter-balance Bernanke’s real goal, devaluation of the dollar. BTW, debt is a form of leverage.  Inflation erases the value of that debt.  The market will catch up to this reality and do the opposite of what Bernanke is trying to engineer through bond purchases.  Sell bonds and buy inflation hedges.
  2. Volatility – massive swings this year.  AND we are still at 20, a level that in PRE-2008 would have been considered a warning sign.  When market players lock in gains and sell Apple, Priceline, Netflix, etc. the hot-money, leveraged-long, risk-on trades will evaporate.
  3. Valuations – ok for normal conditions but extended for a deflationary environment.   If you don’t believe that there is inflationary pressures, look no further to the FED and their spending 900B over the next 8 months to prevent it.  Deflation is by definition a leverage eraser!
  4. Margin – a step up in Silver market is the beginning of something to come in other markets ---- less leverage!
  5. Banking -  no loans, no demand and no money circulating in the real economy.  Why? Because the banks can make risk free profits by playing the yield curve, the excess reserves at the Fed and front-running Permanent OMO.  Leverage consistently erased since 2008.
  6. “The Consumer” – who is borrowing money to spend on housing, durables, autos, etc.  Not many.  Most are paying down debt, i.e. reducing Leverage.  “The Federal Reserve says revolving credit card lines, which are made up of credit card balances, are down about 15% since the end of 2008.”   http://www.federalreserve.gov/releases/g19/Current/
  7. Credit ratings – the agencies have missed another monster – PIIGS and all of Europe.  The story is unfolding just like the sub-prime debacle.  Slowly and hidden at first. It is becoming more obvious every day that Countries like Greece, Ireland, Portugal and others can’ service their debt AND pay their state employees!
  8. Taxes/deficits – damned if we do raise them in a recession and damned if we don’t through our credit rating.  Obama has only one option, to cut spending and that will not happen = higher deficits and more leverage!
  9. Bankruptcy – AMBAC finally died.  Did the CDS exposure underlying that go away too?  It is a triggering event necessitating payments on credit default swaps (Paying out on CDS is always a deleveraging event).  http://www.emii.com/Article.aspx?ArticleID=2714346
  10. Last but not least some random facts that all add up to an eventual evaporation of leverage in the markets when the impact of these issues are realized by PMs and HF managers… House prices still declining; 8 million people still looking for work; Budget deficit approaching $ 1.3 Trillion; States & cities issuing IOUs; Capital spending by small businesses at a 35 year low; Big banks sitting on $1.2 Trillion in cash and refusing to lend; Senior citizens trying to live on 0% interest from their savings

Don’t forget the famous book and how it applies to right now.  Now that we survived the 2008 “near death experience”, seen stocks doubled, tripled, even centupled from the March 09 lows, the crowd believes that a market crash can never happen again!

Rusty Shorts's picture

 - so what you're saying, is that the wheels, axles and frame has fell out from under our wagon? and our horse died?

 

j/k, Great post.

Lucius Cornelius Sulla's picture

Good summary.  The fact that there is talk about removing the full employment puts one more weight in the deflation versus inflation column.  We have barely begun the process of de-leveraging.  The consumer and private sectors have, but so far, the establishment has only transferred bond losses from private banks to taxpayers.  Keeping a bubble propped up through further deficit spending (most of which is going to bondholder bailouts) does not work when the entire economy cannot produce enough cash flow to sustain its present level of debt.  IMO, for stocks, that means look out below!

lizzy36's picture

Please, this is just politics at its finest. All of the sudden the populace has figured out what the Federal Reserve is and so the pandering begins.

Corker, who is against auditing the Fed, because he amusing believes the Fed is still an independent body, is all of the sudden finding religion where the fed is concerned?

Color me highly sceptical.

Watch Corker lick Bernanke's ass:

http://www.youtube.com/watch?v=P7mH2euK_d4

Lothar the Rottweiler's picture

Lizzy FTW!  Corker is a shifty creature as those of us he supposedly represents know all too well.

Miss Expectations's picture

My goodness, that was much more than ass licking!  Corker's head was so far up Bernanke's ass, all I could see were his feet.

Careless Whisper's picture

who trusts corker? miss kaptur nailed it two years ago when she said that criminal banks run the joint.  "they were fraudulent then, and they're fraudelent now". epic.

http://www.youtube.com/watch?v=MeVY7JH_xVU

 

spartan117's picture

Fuck the idiot that junked you.

Hansel's picture

+1, I agree Corker is pandering.  Corker also voted for TARP.  He is a bailout queen and now he tries to find some kind of religion?

packman's picture

Please, this is just politics at its finest. All of the sudden the populace has figured out what the Federal Reserve is and so the pandering begins.

Corker, who is against auditing the Fed, because he amusing believes the Fed is still an independent body, is all of the sudden finding religion where the fed is concerned?

Color me highly sceptical.

+1

Note that Corker voted against the Vitter Amendment:

http://www.ronpaul.com/2010-05-11/senate-rejects-vitters-audit-the-fed-a...

 

and that he specifically spoke out against auditing Fed monetary policy just a few months ago:

 

http://www.huffingtonpost.com/2010/05/06/fed-audit-amendment-deal_n_5666...

 

Sen. Chris Dodd (D-Conn.) will cosponsor Sen. Bernie Sanders' (I-Vt.) amendment to audit the Fed, he said on the Senate floor Thursday afternoon, though with modifications, the details of which are crucial to the weight of the audit.

Sanders had been negotiating a compromise with the Federal Reserve to come to an agreement on how broadly the audit powers would extend, Sen. Bob Corker (R-Tenn.) told reporters.

Corker said he had spoken with Sanders and that the Fed wants to "make sure that the audit is not looking at the open market policy, where you're not looking at how interest rates are set." The White House expressed similar concerns earlier Thursday.

(emphasis mine)

deez nutz's picture

why not just END THE FED altogether?

Bob's picture

Why are we hashing out this "issue" as if we don't know that the Fed's claim of efforts to boost employment is complete bullshit??

Edit: Yeah, I know that they would no longer be able to use that fraud as cover, but surely that wouldn't derail them from full steam ahead on some other grounds. 

DoctoRx's picture

The Fed is a tool of the Treasury Dept-Big Finance alliance.  Remember that the Fed need not explain what it does.  So it will in concert w the above duo continue to exist to create "reserves" to fund the "deficit".  Changing the mandate would make for a nice headline but not change the reality.

A gold standard would change the reality, but the main problem w it is that it is easy to go off from to a new fiat system.  But it might be good while it lasts.

snowball777's picture

<phone rings>

Aide: Hello? Rep. Pence's office.

Voice: Yeah, we saw the bit about the Fed mandate on TV and we weren't very happy about it...you see, we benefit very much from having super-cheap money and interest on our reserves, so we'd really like you to lay off our friend Ben, m'kay?

Aide: We understand, but the representative's position is that the Fed should only prevent inflation.

Voice: Yeah, so to prevent that inflation, he'd have to rain on our parade...and then we'd have to rain on his, follow me?

Aide: Not exactly, no.

Voice: You know those checks we send each time he seeks re-election?

Aide: Yes.

Voice: Kiss them good-bye.

Aide: I'll get the representative on the phone immediately.

<click>

doolittlegeorge's picture

typical Republican..."slow on the uptake."  Needs to find his "understandings of the words" a little quicker.  Like talkin' to cops--"alibi first."

shargash's picture

The Fed isn't keeping rates low to boost employment. The Fed doesn't give a rodent's patoot about unemployment, so long as the economy (and lending!) grows fast enough to keep the fiat ponzi going.

Boilermaker's picture

Exactly, this is about covering up what has been done and perpetuation.

They wouldn't give the unemployed a cup of sweat off of their ball sack.  They could literally care less about it.

snowball777's picture

How fitting that the man from Toyota is performing fucking kabuki.

Next up, bukkake!

Boilermaker's picture

I had to cut up my wife's credit cards because 'talks' just weren't working.  What the hell is the difference?

Dapper Dan's picture

In our house we split our finances 50/50  I take care of the deposits she takes care of the checks.

Dr. No's picture

A relatively common arrangement in households.... As with yours, I am sure when the check side of the work load gets heavy, she gets help for the kids.  Not much help on the deposit side though.

MachoMan's picture

luckily I married (found) a penny pincher.  Couldn't tolerate it any other way...

Gimp's picture

Someones check bounced

rlouis's picture

Not sure why they don't just tweak their statistics a little more.   Anyone out of work for 12 weeks is voluntary unemployed and not part of the workforce. UE3 = 4%.  Alter CPI calculation a little more and inflation sub 1%.  No problem.  If the problem is people don't believe what they say just change the polling questions.  Again, no problem, everything is fine.  Why mess with something when it is working so well? 

moofph's picture

...sure, mr. corker, this will definitely ease the minds of 10 million unemployed americans...as if they were paying attention to all the other words that the fed provides on the cut-and-paste-one-page nonsense. i question why it is necessary to even share this thought of yours...it is already clear to the world (except liesman) that words printed on paper serve no value when alterior motives lurk in the shadows of the ink...the fed's words are just double-spaced-double-speak with bubble-reaking-nonsense always attached at the hip...apparently, shooting blanks at the american citizen and the world as they all run for cover.

e_u_r_o's picture

everythings down today.

TumblingDice's picture

The thinking here is simple: he wants the dollar to be worth something as long as the gov't has such favorable borrowing conditions. Then the government can just borrow then hire and overpay the American worker.

It really doesn't matter. Stupid is, stupid does. Pretty sure the Fed associates employment with inflation anyways. It all evokes a disapproving facepalm.

tickhound's picture

Analogy...

Spinal Tap will "concede" and remove the "11" from the volume dial after complaints that the music is too loud.

notadouche's picture

That is Trichet's mandate I believe.  Only dealing with inflation.  How happy are they in Europe?  How many times did he hide behind the mandate of worrying about inflation and not lowering rates fast enough when it was called for.  Why can't they all just all go away and stop talking.  Corker is just as big a douche as anyone else.

proLiberty's picture

If anyone in Congress is so concerned about the Fed being true to its dual mandates, it has failed far more miserably as guardian of the value of the dollar than it has as guardian of full employment. 

Measured by the dollar price of gold at least, under the protection of the Fed the value of the dollar has only declined by a factor of 70X or so since 19131.  This leads me to ask, in the context of a government agency, what is the definition of failure, especially a failure that would cause Congress to start frantically designing a new replacement as compared to just boosting the funding of the existing institution?

 

tenaciousj's picture

Seeing as how we undoubtly have close to 18,000+ more years of dollar superiority, I think we are blowing this a little out of proportion.