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Are Political Winds Turning Against the Fed?

Phoenix Capital Research's picture




 

The popular view concerning the Fed is that it is apolitical. Anyone who considers the timing of the Fed’s actions knows this is false. However, for the vast majority of Americans, including financial professionals, the Fed is thought to be an apolitical entity focusing exclusively on economic and financial matters.

 

The first indication that this was inaccurate occurred during Bernanke’s reappointment as Fed Chairman in 2009. The media tried to claim that Bernanke was the savior of capitalism, but the fact of the matter was that there was strong opposition to his re-appointment. After all, Bernanke had not only missed the crisis but had in fact repeatedly stated it was contained.

 

From a competence perspective, Bernanke should not have been reappointed. He had an abysmal track record and had in fact allowed the entire financial system to nearly implode. Small wonder then that numerous members of Congress were against his reappointment.

 

During this period, an intense lobbying effort was made on Bernanke’s behalf. Lost amidst the bustle of articles concerning this situation was the following tidbit:

 

I was advised that rejecting [Bernanke's] nomination would cause markets to nose dive, which would hurt retirees and families saving for their future. I am not enthusiastic in my support. " - Senator Barbara Mikulski (D- MD)

 

Here is a US Senator who was advised that not reappointing Bernanke would mean a collapse of the markets. The argument was financial in nature, but it is clear that the Fed was no longer an apolitical body. Bernanke was another political figurehead, who needed support in order to retain control.

 

Barack Obama reappointed Bernanke as Fed Chairman in August 2009. Obama had made a point of disparaging the Bush Presidency for leaving the US economy in shambles during his election and the initial stages of his first term. So it is of note that Obama decided to reappoint Bernanke, who, as Bush’s Fed Chairman, had been a key player in allowing the Crisis to happen.

 

As this stage, Bernanke’s tenure as Fed Chairman became closely aligned with the Obama Presidency, a fact that became increasingly clear in the lead up to the 2012 Presidential election when numerous Republican candidates, particularly Mitt Romney and Newt Gingrich began to single out the Fed, particularly its then Chairman, Ben Bernanke, as a political issue that needed to be dealt with.

 

Indeed, there is no clearer evidence that the Fed became a political organization than Bernanke’s announcement of QE 3 in September 2012, just two months before the election. This move was a clear and unprecedented political intervention on the part of Bernanke to aid Obama in his campaign for re-election. We know this because:

 

1)   The Fed had only just ended QE 2 a few months before in June 2012.

2)   US GDP growth was 1.7% in the second quarter of 2012, well above the 1.3% from the second quarter of 2011 and only slightly below the 2.0% from 1Q12.

 

Moreover, Bernanke didn’t just launch QE 3 in September 2012; that same month he also promised to keep interest rates at zero through 2015.

 

Regardless of one’s personal views, at this point it was clear that the Bernanke Fed was viewed as a political extension of the Obama administration. This politicization intensified after Bernanke stepped down and Janet Yellen was appointed Fed Chair in 2014.

 

Indeed, the New Yorker notes that Yellen is the most liberal Fed Chairman in recent history:

 

Yellen is notable not only for being the first female Fed chair but also for being the most liberal since Marriner Eccles, who held the job during the Roosevelt and Truman Administrations. Ordinarily, the Fed’s role is to engender a sense of calm in the eternally jittery financial markets, not to crusade against urban poverty.

 

http://www.newyorker.com/magazine/2014/07/21/the-hand-on-the-lever

 

Yellen has even touted her version of liberal social justice in speeches. She recently stated that the Fed should continue its accommodative policy even AFTER the economy is back on track:

 

"And so even when the headwinds have diminished to the point where the economy is finally back on track and it's where we want it to be, it's still going to require an unusually accommodative monetary policy," she is quoted as saying in the article that stresses Yellen's role as public servant.

 

"I come from an intellectual tradition where public policy is important, it can make a positive contribution, it’s our social obligation to do this," she says in an online version of the article. "We can help to make the world a better place."

 

http://www.reuters.com/article/2014/07/14/us-usa-fed-yellen idUSKBN0FJ1I820140714

 

We realize we’ve covered a lot of ground here. So we want to do a brief recap.

 

1)   The Fed, which is supposed to be apolitical, has become increasingly politicized in the post-2008 era.

2)   This politicization has intensified in recent years to the point that former Fed Chairman Bernanke actively boosted the economy with QE 3 to help the Obama administration’s reelection bid.

3)   Today’s Fed is openly political in its monetary views on social justice.

 

In this light there has been a recent shift in political attitudes towards the Federal Reserve. That shift finds Congress pushing to crack down on the Fed’s monetary policies… particularly the fact that the Fed never has to answer to anyone.

 

New legislation is being introduced to make the Fed accountable to Congress.

 

So it is good news that today the ‘‘Federal Reserve Accountability and Transparency Act of 2014” was introduced into Congress. It requires that the Fed adopt a rules-based policy…

 

Thus the rule would describe how the Fed’s policy instrument, such as the federal funds rate, would change in a systematic way in response to changes in the intermediate policy inputs, such as inflation or real GDP. The rule would also have to be consistent with the setting of the actual federal funds rate at the time of the submission.

 

The Fed, not Congress, would choose its Directive Policy Rule and how to describe it.  But if the Fed deviated from its rule, then the Chair of the Fed would have to “testify before the appropriate congressional committees as to why the [rule] is not in compliance.”  The Comptroller General of the United States would determine whether or not the Directive Policy Rule was in compliance and report to Congress.

 

http://economicsone.com/2014/07/07/new-legislation-requires-fed-to-adopt-policy-rule/

 

This represents the beginning of something BIG for the Fed. The actual process will months. But we need to be aware of this change because it would greatly rein in the Fed’s actions going forward. Given than the Fed is the driving force for the capital markets and risk today, this issue is of major import.

 

This concludes this article. If you’re looking for the means of protecting your portfolio from the coming collapse, you can pick up a FREE investment report titled Protect Your Portfolio at http://phoenixcapitalmarketing.com/special-reports.html.

 

This report outlines a number of strategies you can implement to prepare yourself and your loved ones from the coming market carnage.

 

Best Regards

 

Phoenix Capital Research

 

 

 

 

 

 

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Wed, 08/27/2014 - 03:24 | 5148199 pashley1411
pashley1411's picture

There is no such thing as economics.    Its simply politics in numercal sheep fleece.   Yellen is a politician, her "brief" is to keep the shell-game going 5 minutes longer.   

Once the class she works for have sucked the monetary goose dry, her partisans plan on holding hard assets.

Wed, 08/27/2014 - 03:04 | 5148188 hedgiex
hedgiex's picture

Dream On. some theatrics will be permitted.

As a baseline academic (useless) argument, even if Congress (ill equipped) to provide guidance to a complex global  economy where the Empire has to operate in with less muscles, the guidance/rules will be gamed by the Fed. All you get is some future entertainments of finger pointings on who is responsible and wriggling out of blames by Politicians.

Still not getting it that the US version of free markets is in captivitity by the Oligarchs and Banksters.

Wed, 08/27/2014 - 01:37 | 5148105 U4 eee aaa
U4 eee aaa's picture

So the minute the Fed actually tries to help the poor, THAT is when the politicians turn on it? Seriously?

Tue, 08/26/2014 - 22:12 | 5147579 pndr4495
pndr4495's picture

Eustace Mullins discovered the financial chicanery surrounding the FED. G. Edward Griffin carried the torch later. That was quite a few POLITICAL words to discuss a PRIVATELY owned cartel given the franchise to issue our country's money. The IRS and income tax were creatd to cover the financial liability for the cartel when there were bad bets placed on the table by them - after all being accountable for their bad loans and bad bets is beneath the monied class. These people are malevolent and they have only their own interests to promote. Peer to Peer banking will eat away at these people's scheme like a terminal cancer. Check out digital currency and use it wherever and whenever you can. Also read up on a fella named Smedley Butler.

Tue, 08/26/2014 - 21:16 | 5147382 Ewtman
Ewtman's picture

"This represents the beginning of something BIG for the Fed. The actual process will [take] months. But we need to be aware of this change because it would greatly rein in the Fed’s actions going forward. "

 

Seriously? Without the ability to audit the Fed in real-time there is no accountability. Of course, with the ability to audit the Fed, it disappears, succumbing to the public's realization of the criminally fraudulant organization it really is.

Tue, 08/26/2014 - 21:00 | 5147352 optioneer
optioneer's picture

The Fed hasn't been apolitical since, like, ever. 

http://utpress.utexas.edu/index.php/books/auedec 

 

Tue, 08/26/2014 - 20:30 | 5147280 DOGGONE
DOGGONE's picture

The Public Be Suckered
http://patrick.net/forum/?p=1223928

Tue, 08/26/2014 - 22:48 | 5147702 Lets Buy The Dip
Lets Buy The Dip's picture

and what about the market...... We've had a heck of a run, it's been over three years since we've had a 10 percent correction, makes one wonder....and the latest bout with weakness didn't even get to a five percent correction, sentiment trader predicted this run

There is an aussie trader who predicted this rally here -> http://bit.ly/1fMcakI

I am out of the market now, but cramer and his cronies think we are going to crash soon. Interesting.

Tue, 08/26/2014 - 19:36 | 5147147 himaroid
himaroid's picture

First asshole cramer says "THEY KNOW NOTHING!, NOTHING!" Now he says they are doing a great job. What will he say next?

Tue, 08/26/2014 - 21:46 | 5147489 NoPension
NoPension's picture

Booyah

Tue, 08/26/2014 - 19:35 | 5147142 AdvancingTime
AdvancingTime's picture

Regardless of what you call it the "Federal Reserve Nightmare" or the "Yellen conundrum", the box Ben Bernanke made when he painted both himself and the Federal Reserve in a corner remains. Bernanke has by passing the chairmanship to Yellen escaped from the QE trap, but left the rest of us and the country remain fully in its grasp.

With a policy of loose and cheap money  and an inflation target of just 2% the Federal Reserve  continues to please those gambling in the stock market that not fighting the Fed guarantees profits. I wish someone would let the Fed know we have already passed their inflation target.

As many Americans are forced to pay higher food, gasoline, and health insurance premiums any thought that inflation is not higher has come from the false illusion brought from lower payments on things like auto loans and mortgages. This is a one off and will not continue. Trouble lurks ahead. More on this subject in the article below.

 http://brucewilds.blogspot.com/2014/06/exit-strategy-from-qe-remains-elu...

Tue, 08/26/2014 - 17:56 | 5146840 lordbyroniv
lordbyroniv's picture

ALL TOO LATE.

 

WHAT DIFFERENCE DOES IT MAKE????

Tue, 08/26/2014 - 17:43 | 5146791 DullKnife
DullKnife's picture

If the RICO laws were applied to the Fed, would any of them still be walking free?

 

Tue, 08/26/2014 - 17:08 | 5146575 Radical Marijuana
Radical Marijuana's picture

"The popular view concerning the Fed is that it is apolitical."

We live in a Bizarro Mirror World, where everything is proportionately backwards. The Fed is the MOST political institution, because it is the single greatest triumph of organized lies operating robberies. Governments are the biggest form of organized crime, controlled by the best organized gang of criminals! The Fed is the single greatest institution on the planet which manifests the ways that FRAUD IS KING.

(While one can rightly argue that the Bank of International Settlements is the King of Kings of Fraud, since the American dollar is the global reserve currency, the American Federal Reserve Board is the central bank which is the single most salient King of Fraud.)

Since the overwhelming vast majority of people deliberately do not want to face the fundamental facts that money is measurement backed by murder, while the ways that actually works are that the best professional liars and immaculate hypocrites are rewarded for promoting the biggest bullies, or banksters' bullshit world view, we have been inside of a runaway situation of the exponential growth of a system of debt slavery, backed by wars based on deceits, which has generated numbers which have become debt insanities, on the verge of provoking death insanities.

In my view, this kind of article above is grossly superficial in the degree that it stays within the frame of reference of the biggest bullies' bullshit world view, which gets away with deliberately ignoring and denying the basic social and ecological facts. The winds of reality are blowing more and more against the Fed, because systems of enforced frauds suffer from their profound inherent contradictions that enforcing frauds never makes them stop being false.

Human realities were always organized lies operating robberies. The Fed was merely the single greatest single institution to have been doing that, so far. The Fed was EXTREMELY POLITICAL, in the sense of being the result of organized crime controlling civilization. However, since almost everyone inside the controlled opposition groups to the Fed deliberately refuse to face those basic facts, their "solutions" are always the same sort of bullshit, that continues to backfire badly!

Anyone who studies the history of the Federal Reserve Board recognizes that it has an almost perfect track record of actually doing the opposite to everything it was supposed to do! (However, almost nobody recognizes that kind of Bizarro Mirror World backwardness goes deep into the philosophy of science, far, far beyond the relatively more superficial levels of the shallower sorts of contradictions pointed out in this article above.)

I believe that, after looking at the actual Fed track record, anyone who does not recognize that the Fed actually achieves the opposite of what it states its purposes to be is a political idiot, like anyone who believes "The popular view concerning the Fed is that it is apolitical." The degree to which that kind of ridiculous bullshit story is able to be promoted, despite the abundance of evidence that proves the opposite is the case, relates to the ways that the controlled opposition groups to the Fed continue to also operate within the same bullshit frame of reference. In fact, the only things which exist are different systems of organized lies operating robberies, in dynamic equilibria with each other. The triumph of the Fed was in making most people believe in the bullshit world view that somehow that was not the case!

All human beings operate as entropic pumps of energy, which are best described by the principles and methods of organized crime. The Fed was the premier example of that process! There are no genuinely better resolutions outside of more people perhaps understanding that better. Maybe, we could develop better dynamic equilibria between the different rates of social robberies, which would then be able to achieve a better balance to the rates of human robberies of the natural world?

However, I would not hold my breath waiting for that to happen, since were are currently in a runaway in the opposite direction. The paradoxical products of social successes based on enforced frauds have resulted in almost nobody understanding that, nor wanting to understand that! The Fed is the most extreme particular example of the triumph of enforced frauds dominating the language and ways that people think, so that they do that as backwards as humanly possible!

Tue, 08/26/2014 - 16:30 | 5146434 Comte d'herblay
Comte d'herblay's picture

If the FED cares about politics, it is only in the case of a political animal doing anything that interferes with it.  Should that occur, the FED has on their payroll the right kind of muscle to silence it. 

Otherwise, it's 'politics' is centered solely on the wishes of the Jewish Mafia on Wall Street.  i.e.   Greenspan, Bernanke, J Yell. What do they have in common besides being three singularly unattractive drones who speak in tongues, a glossolalial profundity only rivaled by an extemporaneous speech by Demosthenes with stones in his mouth??

They have been in control of the FED for going on 35 years and counting.  

Wed, 08/27/2014 - 04:50 | 5148242 Notsobadwlad
Notsobadwlad's picture

And have systematically been destroying this country from the inside out. Evil, pure evil.

Putting Congress in charge of the Fed and creating a formula for actions is the way that those who have been running the Fed and this country over the cliff get to place the blame on hapless politicians.

... but sir, it was congressional control and their formulas that caused it to crash. I swear, yes I do...

Tue, 08/26/2014 - 16:28 | 5146424 Ewtman
Ewtman's picture

The Creature from Jekyll Island has had a good long run but it's days are numbered...

 

http://www.globaldeflationnews.com/the-creature-from-jekyll-island-the-e...

 

Tue, 08/26/2014 - 16:13 | 5146380 optimator
optimator's picture

The only time I've ever heard any politician even mention the FED, ever, was from Dr. Ron Paul and Dr. Rand Paul.  All the rest, at election runs, debates, policy statements, treat the FED as if it doesn't exist, muchless that they alone can do something about it.

Tue, 08/26/2014 - 16:12 | 5146376 ken
ken's picture

Who advised her? Dual citizen? Name? 

I was advised that rejecting [Bernanke's] nomination would cause markets to nose dive, which would hurt retirees and families saving for their future. I am not enthusiastic in my support. " - Senator Barbara Mikulski (D- MD)

Tue, 08/26/2014 - 16:31 | 5146438 Comte d'herblay
Comte d'herblay's picture

Pick any member of AIPAC and Shoshana Kardin as the Emeritus ombudswoman.

Tue, 08/26/2014 - 16:12 | 5146373 dontgoforit
dontgoforit's picture

Rubbish.  They want you to buy rubbish.

Tue, 08/26/2014 - 15:50 | 5146291 moneybots
moneybots's picture

"So it is good news that today the ‘‘Federal Reserve Accountability and Transparency Act of 2014” was introduced into Congress."

 

So much for accountability and transparency. 


Tue, 08/26/2014 - 17:38 | 5146755 DullKnife
DullKnife's picture

Like the Fed or the Feds could give a bleep about what the people want....

 

Tue, 08/26/2014 - 15:46 | 5146273 moneybots
moneybots's picture

"I come from an intellectual tradition where public policy is important, it can make a positive contribution, it’s our social obligation to do this,"

 

Public policy has been ruinous.  Manipulation always leads to making things worse in the final equation.

Tue, 08/26/2014 - 15:17 | 5146156 therearetoomany...
therearetoomanyidiots's picture

No

Tue, 08/26/2014 - 15:05 | 5146102 lasvegaspersona
lasvegaspersona's picture

If the dollar was just a medium of exchange then few would really care if there was a little too much or too little. Because it is also our store of value (for most) it must be expanded to accomodate our hoarding. If suddenly it is perceived to be weak we will lose not only our ability to trade but also our savings.

For this reason some savings in other vehicles is suggested. Gold is best but if you are super rich you'll have to settle for farmland and art work. At currenct prices not enough physical gold can be found to satisfy this use....for the very wealthy...for us peons it is not yet a problem and there is relatively plenty....and it is cheap..for now.

Tue, 08/26/2014 - 21:58 | 5147532 NoPension
NoPension's picture

Not enough phys at current prices, eh? What to do, what to do? Where and how can we get more gold to satisfy demand, so the true giants can protect their wealth?

what to do....

oh, here is an idea..... let the fucking price in dollars rise! How's that? Will that work? Just revalue gold at $50,000 an ounce. Will that cover it?

So sick of the manipulation. So sick of all of it.

Tue, 08/26/2014 - 15:00 | 5146071 RaceToTheBottom
RaceToTheBottom's picture

I think the FED is more pro FED than any political affiliation.  

Kinda like WS gives money to both sides to make sure they have bought their success regardless of which color team gets elected.

 

Tue, 08/26/2014 - 14:48 | 5146015 disabledvet
disabledvet's picture

Hard to call Greenspan's Fed "politically motivated."

And of course Bernanke having promised to keep rates at or near zero through 2015 then proceeded to taper in the summer of 2013.

That taper proceeds apace...time to ramp up the war?

Anything to prevent a price collapse real or perceived? Or is it "anything to keep the war alive" and not hope or change?

Tue, 08/26/2014 - 15:07 | 5146115 JRobby
JRobby's picture

Hard to call Greenspan's Fed "politically motivated."

Are you fucking kidding?

Tue, 08/26/2014 - 14:45 | 5146001 KingTut
KingTut's picture

The truly sickening thing is that if we "End the Fed', we will almost certainly end up with a goverment agency responsible for base money supply (AKA  printing).  They won't be able to find the off switch to the press.  The problem is not that the fed is independent of political influence (in theory), its that it is totally controlled by the banks.  The central bank needs to be independent of both the government and the bankers.

I know this is impossible in any idealistic sense, but something better than what we have now could be achieved in a practical way.  Letting the government control base money would end the republic in a breathtakingly short amount of time.

Tue, 08/26/2014 - 16:37 | 5146457 Comte d'herblay
Comte d'herblay's picture

The central bank (how innocuous that reads) is not under the control of the banks. It is under One ethnic group's control:  the Jews for going on 40 years

Had the three FED chairmen been named:  Corleone, DeLuca, and Gotti, eyebrows would be reaching Groucho-like skyward, alarm bells would be clanging, and the Jewish controlled media would be screaming Bigotry at the FED. 

Tue, 08/26/2014 - 15:54 | 5146286 free_lunch
Tue, 08/26/2014 - 14:14 | 5145887 lunaticfringe
lunaticfringe's picture

I guess the point of this piece was to inform us that the FED picks and chooses the winners and losers. Politically and economically.

Somehow I don't think this will be news to those that inhabit ZH.

Tue, 08/26/2014 - 17:41 | 5146781 DullKnife
DullKnife's picture

The little people got $300.

The Fed provided what?  $16 trillion to its member banks and other super rich with their hands out?

 

Reminds me of the sign above the urinal in the public bathroom:

 

"Please do not throw your cigarette butts in the urinal.

It makes them soggy and hard to light."

 

 

Wed, 08/27/2014 - 02:40 | 5148177 Otrader
Otrader's picture

That sort of theft is all legal.  100% legal.

Tue, 08/26/2014 - 14:03 | 5145819 Proofreder
Proofreder's picture

Don't need a weatherman to tell which way the wind blows ...

End the Fed - the 101 year-old experiment is a failure.

Tue, 08/26/2014 - 19:55 | 5147185 Buck Johnson
Buck Johnson's picture

What it looks like is that they are trying to find someone to blame before the market implodes.  The couldn't get a war going with Russia and so the only thing as politicians will do is to go after what the conspiracy people have been saying forever, it's the Fed.

 

 

Wed, 08/27/2014 - 02:53 | 5148184 Otrader
Otrader's picture

It's a zero sum game.  Wall st. is always on the other side of every trade.  Someone has to lose and it ain't going to be them.

 

Wed, 08/27/2014 - 04:45 | 5148240 Notsobadwlad
Notsobadwlad's picture

Not when they control price and you do not. But it is not a zero sum game, is it? They use inflation to constantly increase the whole and dilute value. It is diabolical.

Wed, 08/27/2014 - 07:12 | 5146481 Comte d'herblay
Comte d'herblay's picture

Sorry, Proofie, you are dead wrong.

For too many reasons to list here, the FED has succeeded beyond its wildest dreams. 

Imagine:  With the numerical keypad on their laptops, Bernanke and now J Yell, have been able to instantaneously give with no questions asked, a quadrillion brand spankin' new FRNs to Goldman Sucks' Lord Blankfein and his other ethnic brothers and sisters over the last 6 years, and they are still doing it.  Takes about ten seconds.  

For doing nothing.  

If ever there was a bar to be set for outlandish, fiendishly successful success, the FED  is the sine qua non.

 

Wed, 08/27/2014 - 10:26 | 5148980 Alhazred
Alhazred's picture

Personally I'm fed up with it.

;p

End the fed, end government monies, end government.

Tue, 08/26/2014 - 15:42 | 5146257 Frankly Speaking
Frankly Speaking's picture

I would use the State's own tactics in labelling. As in the Patriat Act. Rather than" end the fed " instead aim to "Save the Fed". ( Federalize it. )

It might be easier for the vast majority to save something they do not understand than to end something they do not understand. It's kind of like asking if you want to save your way of life, or end it.

Wed, 08/27/2014 - 07:14 | 5148348 Comte d'herblay
Comte d'herblay's picture

U wrote Bill Cliton's narrative during his impeachment, didn'tcha?

Tue, 08/26/2014 - 21:19 | 5147402 linniepar
linniepar's picture

I can be keen, but this is fucking genius!

Do NOT follow this link or you will be banned from the site!