"The Great Unraveling" - Hilsenrath Slams The Fed: "Years Of Fed Missteps" Foster US Populism, Disillusion

Tyler Durden's picture

For years we have argued that the main reasons for rising social anger, populist sentiment, and general disillusion with the US economy boils down to one thing: the Federal Reserve, which as we have argued since 2009, has approached the crisis aftermath in a wrong way, generated unprecedented wealth inequality through its monetary policy favoring a tiny fraction of the population - those invested in risk assets - and instead of reflating another debt bubble, should have allowed the system to undergo a debt purge and start afresh.

For this we have been branded perpetual conspiracy theorists and permabears.

Moments ago, none other than the WSJ's Fed "whisperer", Jon Hilsenrath admitted these allegations have been correct in an article titled "Years of Fed Missteps Fueled Disillusion With the Economy and Washington", and which as the WSJ notes "helps explain one of the US's most unpredictable, populist political years."

In other words, it is the Fed's policies that have led to the current failed economic regime (as noted again yesterday by Citi's Matt King and today by former Fed governor Kevin Warsh), and which are responsible for the rise of such candidates as Donald Trump. Which, incidentally, is also something we have predicted over the years would happen. As such we are delighted that one of the most popular establishment Fed watchers now agrees with our assessment.

This is what Hilsenrath writes:

In the 1990s, a period known in economics as the “Great Moderation,” it seemed the Fed could do no wrong. Policy makers and voters saw it as a machine, with buttons officials could push to heat or cool the economy as needed.


Now, after more than a decade of economic disappointment, the central bank confronts hardened public skepticism and growing self-doubt about its own understanding of how the U.S. economy works, a development that helps explain one of the most unpredictable and populist political seasons in modern history.

Some highlights from the piece focus on the Fed's own admissions:

“There are a lot of things that we thought we knew that haven’t turned out quite as we expected,” said Eric Rosengren, president of the Federal Reserve Bank of Boston. “The economy and financial markets are not as stable as we previously assumed.”

... The rise of Trump:

For anyone seeking to explain one of the most unpredictable political seasons in modern history, with the rise of Donald Trump and Bernie Sanders, a prime suspect is public dismay in institutions guiding the economy and government. The Fed in particular is a case study in how the conventional wisdom of the late 1990s on a wide range of economic issues, including trade, technology and central banking, has since slowly unraveled.

Here, unwittingly, Hilsenrath admits that by perpetuating the status quo policies, Yellen is explicitly furthering Hillary's presidential campaign.

Meanwhile, revulsion against the Fed is rising:

Once admired globally for their command of the economic system, central bankers now are blamed by the left and right for bailouts during the financial crisis and for failing to foresee and manage forces suffocating the global economy in its aftermath.


Populist protest movements called “Fed Up,” “End the Fed” and “Occupy Wall Street” lashed out at the bank’s policies, and in the case of End the Fed, its very existence. Lawmakers of both parties want to subject it to more scrutiny or curb its powers.

Confidence in the Fed - and all other US institutions - has collapsed, for good reason:

“I certainly myself couldn’t have imagined six, seven years ago that we would be employing the policies we are now,” Fed Chairwoman Janet Yellen said to a packed ballroom in New York earlier this year. She lamented the government has leaned so heavily on the Fed to stimulate the economy while tax and spending policies were stymied by disagreements between Congress and the White House.

Confidence in the central bank’s leadership has dropped. An April Gallup poll found 38% of Americans had a great deal or fair amount of confidence in Ms. Yellen, while 35% had little or none. In the early 2000s, confidence in Chairman Alan Greenspan often exceeded 70%.



Even the Fed now admits it no longer knows what it is doing, with the main culprit being the massive debt overhang:

“What was missing to me was the in-depth understanding of how much risk and leverage had grown in the financial system and basically how lacking in resilience the financial system as a whole was to this kind of shock,” Mr. Williams said in a recent interview.

And then there is the question of what happens if the Fed loses control, something one of its staffers earlier this week said would require another $4 trillion or more in QE:

Still looming is potentially the biggest reversal of all in the modern conventions of central banking. If another recession hits, it isn’t clear the Fed has the tools available to mend the economy, a subject Ms. Yellen could address in Jackson Hole.


Traditionally the Fed cuts interest rates in a downturn. With its benchmark short-term rate near zero, it can’t be pushed much lower. If recession hits, the Fed will likely resort to unpopular tools used after the financial crisis, including Treasury-bond purchases and more promises to keep short-term rates low far into the future.


“We should be extremely worried,” Mr. Summers said. “We are essentially on a fairly dangerous battlefield with very little ammunition.”

* * *

But why put this "stunning" admission out now, one day before Jackson Hole, and why confirm that the Fed is losing control in its "fight for the economy", and is responsible for the current sad state of affairs? Simple: this is the grand pivot to push for "fiscal stimulus." The irony: "fiscal stimulus" is merely a phrase for issue more debt, at least a trillion dollars more, according to a Reuters analysis.

And all that debt will ultimately need to be purchased, or monetized, by someone. Someone like the Fed.

In other words, all this Hilsenrath mea culpa, which most certainly was greenlighted by the Fed, seeks to achieve is to give the Fed ammunition to ultimately double down on the same policies that even it admits have not worked, where following the brief infatuation with a rate hike, it will once again resort to monetizing, what else, more debt.

The real conclusion? As Matt King pointed out yesterday, when he correctly predicted that all central banks will do, is "double up"...

...  is that "the distortions will get even bigger."

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PAWNMAN's picture

Since when did this Fed tool grow a pair?

ThanksChump's picture

Populism sounds almost benevolent in comparison to what people really feel.


Mussolini ended as an ornament in the Italian street, hanging upside down from a meat hook. He should have paid more attention.

Looney's picture


You can’t step ON a pile of shit if you walk IN knee-deep shit.

Confucius   ;-)

knukles's picture

It's not the markets that are unstable, Mr Rosengren

JRobby's picture

Keep the sheep dumb

The Fed should have been taken apart in 1930. Now it will be 2016/2017.

remain calm's picture

He knows the system is going down. He has been their willing mouthpiece for years and as a result has enriched himself and become a medie celebrity. 

Dear Jon 

When the systen goes down you get strung up with the rest of them. Just because your not in the bank during the robbery does not make you less culpable. The look out guy outside the bank is just a guilty. Fuck you Jon and have a nice life in Hell.

Paul Kersey's picture

The Fed and other central banks have but one reason for their existance, to indemnify bond holders.  That 76% of Americans are living from paycheck to paycheck, have little or no savings and will have even less for retirement, are not problems for central bankers. As long as bond holders are made whole, on the backs of the middle class, the central bankers will believe it's mission has been accomplished.  The central bankers enable the bond holders to extract society's wealth, while doing nothing to stabilize society.

lasvegaspersona's picture


The 'bond holders' are connected to the voters through their pension plans. When debt fails in our current system it must be replaced with base money or the whole things comes down....and be replaced it will...right up to and through hyper inflation.

eatthebanksters's picture

This is not the Fed's fault...Congress has been to limp dicked to deal with the hard issues and so has passed the policy making buck to an institution protected from elections.  Just think, to deal with our problems Pols would needto deliver bad news to some group (or all of us) about belt tightening, shrinking benefits, etc.  Know any politicians who ever got elected delivering bad news?  Nah...politicians need to give free shit away to get elected...the Fed has no such need.

knukles's picture

Interesting media today.
Rosengren and Hilsenrath bashing/scathing the Fed in public.  AKA Pilloried.
FP article on Zika being the first shot in the Global Bio-War  (FP says thereby, the Establishment will be doing so, and it's OK)
Interesting confluence of events, let alone MOAR dirty e-mails.

Methinks we're being told something, if we just quit hearing and listen

World's Churning
About as attractive as the Dark Glowing Center of the Human Ghetto

And the Fed's gonna take the fall, meaning that Congress takes over the money creation process as a solution to the Fed's failure.
God help us!

NoVa's picture

Knukles - Very interested indeed.  Releasing the day before the Fed Jackson Hole meeting and speech -

knukles's picture

Yes.  Way too many coincidences, by me.

indygo55's picture

Anything this guy says is fully vetted by the FED. Its all theatre. There is always an agenda. Just this discussion about him is a distraction. He is a propaganda mouthpiece and nothing more. Treat accordingly. 

RaceToTheBottom's picture

The FED and the Congress are two sides of the same coin.  

One side the FED, has relatively no downside to its actions, short-term.  Longer term, obliteration of the meritocracy of the US and guaranteed revolution, but that is in a few years.  

Congress cannot act with such ease, since the fiscal discipline required would take democrats and republicans to both be smart and to deal with each other.  Both of those qualities do not exist in any politicians.

So now we are beginning to see the fraying of the relationship between the two criminals, much like bank robbers turning on each other after the heist....

ultraticum's picture

I didn't see a "END THE FED already" category in that useless POS propaganda chart, above.


A joke to be talking around the edges, as always.

strannick's picture

These weren't mis steps by good natured bumbling academics 

It's been a decades long systematic take over by globalist satanists 

ThanksChump's picture



They are not quite done picking our carcasses clean yet.

remain calm's picture

He is one of the first rats jumping from the ship

mkkby's picture


The jagoff is saying they haven't done enough.  He's another Krugman -- he's saying QE hasn't worked because they went much too small.

The cure for drunkenness is not another bottle of tequila...  get a case this time.  Better yet, a swimming pool.  Brought to you by the people doing god's work.

Doom Porn Star's picture

'My Big Fat FED Martingale

GotNuttin'todo's picture

Exactly Knuckles.

“The economy and financial markets are not as stable as we previously assumed.” Total BS. If left to their ways, markets work themselves out with modest volatility. Only corrupt intervention causes extreme instability.

DavidC's picture

You're right.

Heaven help us if they double down as suggested by the Tylers. Could they REALLY be that stupid (or have I answered my own question by asking it)?


VD's picture

reading comprehension: he didnt grow a pair -- he is pushing indirectly for what Paul Krugman has been: MOAR DEBT, MOAR QE, MOAR FAIL....

BandGap's picture

The Fed didn't do anything it wasn't told to do.

We knew when Yellen was appointed she would be the one in front of the firing squad at the end.

No surprises here. They have begun to eat their own because they can see what awaits down the road.

hxc's picture

It's like Schiff said; Bernanke left a brick on the accellerator and jumped out at just the right time before the truck hits the wall.

RaceToTheBottom's picture

Actually Greenspam is the one that did it well.  Now he goes back to his "gold is good" blatherings.  Brilliant.


fbazzrea's picture

i suspect if Ms. Yellen didn't know she was the sacrificial dove when she was appointed Fed chair, she has since realized it. it shows in her facial expressions, body language and voice. honestly, i feel sorry for her. she's probably someone's nice granny.

it's the political hacks on both sides of the aisles for the last 45 years that have failed to do their jobs and balance our federal budgets. each successive administration and our collaborative congressional prostitutes have continued peddling our citizens' wealth on the street corners of Corporatocracyville to the tunes of Yankee Doodle Dandy and Take the Money and Run.

so once upon an imagination, possibly a conversation between Misters Global went something like this:

"whew! dodged a bullet in 08-09 but it's getting close to time for paying up. who can we get to take the fall?"

"i don't know. we promised no crash on Ben's watch. hey, that nerdy little sheepish Yellen gal would probably not get strung up. she's so pitiful. surely, the mobs will give her a pass."

"yeah, but will she do what we say?"

"oh yeah... she's a team player. but of course, it'll cost us a huge paid-up life insurance policy for her heirs but she'll take a bullet for the cause, i'm sure."

or... maybe not. 

decon's picture

He's lashing out to regain relevance after Janet cut him off as the unofficial Fed mouthpiece.

undercover brother's picture

he didn't grow anything.   he hedged by claiming absolutely nothing will change and the fed will simply double down, as if it's a foregone conclusion.  

nc551's picture

Somethings coming.  Why are all the traitors starting to sound the alarm?

knukles's picture

Yes, indeed. 
Even more scary, a Foreign Policy magazine article on how ZIKA was the first shot in bio-wars.


FP is one of the Establishment's (Propaganda) arms, formally breaking ground on new directions.
Gotta listen to what the opfor's saying.
Now bio-war's A-OK

JRobby's picture

Developed and patented by the Rockefellers

Elco the Constitutionalist's picture
Elco the Constitutionalist (not verified) knukles Aug 25, 2016 11:22 AM

FP is not just some establishment parrot. FP is the official publication of the Vile Council on Foreign Relations. They are the heart of the globalist beast. Hillary Clinton was video taped (infamously) saying to the (((CFR))) paraphrased "It is good you are so close, now we don't have to go far to find out what we are supposed to think".

chosen's picture

The rats are deserting a sinking ship.

SubjectivObject's picture

Hilsenrat slams the Fed, you say.

Why do I feel that someone just put a sack over my head?

spanish inquisition's picture


Pretty sure she would of known if she had been reading ZH.

“I certainly myself couldn’t have imagined six, seven years ago that we would be employing the policies we are now,”

hxc's picture

Mises.org, lewrockwell.com, etc


Rainman's picture

Where was Hilsenrat when we here at ZH predicted the Fed slippery slope 6 years ago ??

SheepDog-One's picture

Busy calling us all miscreant conspiracy kooks, as I recall.

11b40's picture

Exactly.....fuck this Wall St. tool.  Not one word about how complicit the media, especially the financial media, has been in all of this lying, theft, and general corruption.  Not a mention of how the system of political contribution bribery has set the country on a path to third world rot.  Not even a token nod to the revolving door between the Fed, the NY Fed, the major Financial houses (see Goldman Sachs for best example), and Washington appointments to power positions.  Any mention of who owns the Fed?  I didn't see one.

Something is happening, and it looks like the guilty are running for cover and trying to protect themselves.  When the shit hits the fan, they will all be selling out one another.

Things that go bump's picture

Under questioning they will certainly give up names, many names. No doubt they will eventually name their own children, but it won't change their ultimate fate.

Government needs you to pay taxes's picture

Media stooges need to hang alongside their bankster and politico pals.

SubjectivObject's picture

Don't leave out the managing editors and producers of respective schill shams.

Lady Jessica's picture

This could have been put more succinctly.

Public discontent with the FED is not so much about the magnitude of the fraud that it perpetrates.  What's crucial are the new and evolving means for becoming aware of the fraud.

The internet is the genie they let out of the bottle.  The only way to stuff it back in is to switch it off.

Mustafa Kemal's picture

And that is only the beginning: enter Blockchain.

ThanksChump's picture



Blockchains require an internet that will cease to exist following the next big event be that war, famine, social or financial collapse. Betting on blockchain currencies isn't the fool's game that fiats are, but toilet paper, single-malt scotch, or cases of Sta-Bil Diesel are better investments for value storage than BTC or one of the other many MANY blockchain currencies.

People think the internet is permanent and eternal. Lol.