The Number One Factor Influencing Fed Monetary Policy

Tyler Durden's picture

Submitted by MN Gordon via,

A brief scan of the financial and economic landscape – both in the U.S. and abroad – offers ample confirmation that we are in the midst of a great reset.  From a feint tickle at the turn of the new millennium to a persistent itch a decade ago, the preponderance of evidence in this regard is now much too painful to ignore.  There’s no denying that things ain’t right.

Debt is increasing while GDP’s stagnating.  Stocks are rising while earnings are declining.  Incomes are flat-lining for the majority of workers while growing by leaps and bounds for the 1 percent.  Plus there’s over $13 trillion of negative-yielding debt.

With all this going on, what’s become lucidly clear is the frank understanding that there’s nothing that can really be done to reverse it.  No executive order.  No monetary policy adjustment.  No congressional stimulus package.  No presidential candidate.

None of these, or any other conceivable command and control options, can really do a thing about it.  In fact, at this point, even the most well-intentioned of government programs will likely make the ultimate breakdown and dissolution much, much worse.  The hole’s already been dug far too deep to climb out of.

In short, the economic model of the second half of the 20th century is over.  Increased issuances of debt no longer translate into increased economic growth.  Instead, they produce wild asset price swings, casino style speculation, and epic bubbles and busts.  Nonetheless, the technocrats continue offering up yesterday’s solutions with unabashed certainty.

Bird-Dogging the Fed

Many of the heavy hitters within the monetary policy realm have presently gathered in Jackson Hole, Wyoming, for their annual powwow.  No doubt, they’re using the juncture to pontificate on the glories of an elastic currency.  They’re also flattering the brilliance of a centrally planned economy.

Will they offer a hint or inkling about how much longer they’ll press the federal funds rate to near zero?  This may be asking too much.  After eight years they’ve yet to achieve their objective; consequently, they may never get there.

On Friday morning Fed Chair Janet Yellen will deliver her speech.  Some believe she’ll use the occasion to provide clear and concise communication to investors.  We have some reservations.

The scuttlebutt on the street is that the title of the symposium is “Designing Resilient Monetary Policy Frameworks for the Future.”  We don’t quite comprehend what this means.  But it may have something to do with the fact that stock market investors are bird-dogging the Fed, and the Fed doesn’t know what to do about it.  Thus far, Yellen and her cohorts are petrified to do anything to upset them.

Hence, to achieve resilient monetary policy the Fed would have to do the opposite of what it has done since the advent of the Greenspan put following the October 1987 stock market crash.  They’ll have to withdraw liquidity at the very moment that markets move against overleveraged investors.

In other words, they’ll need to accept a market crash, and subsequent economic contraction, in the hope of attaining some credibility.  Not since the days of tall Paul Volcker has this been something the Fed’s been willing to do.

The Number One Factor Influencing Fed Monetary Policy

Perhaps Yellen will take the opportunity to make a big pronouncement.  Perhaps she’ll admit to the immense wealth destruction the Fed has wrought over the last 100-years.  She may even announce termination of the Fed, discontinuation of Federal Reserve notes, and a return to the gold standard.

Alas, this is all highly unlikely.  In truth, it’s near impossible.  But that doesn’t mean it’s wrongheaded to mention.

The point is, over the last decade – or more – we’ve consistently underappreciated the number one factor influencing Fed monetary policy.  In particular, we’ve underappreciated the extent to which the dumbass factor has taken control of the hearts and minds of the money price fixers.  Here we turn to Jeffery Miller, of StockResearch, for edification.

Central banks keep reloading and doing dumber and dumber things, and since their stupidity seems to know no bounds, I’m willing to say that I don’t know how dumb things will get before they stop.  What I do know is that locking in a guaranteed loss on bonds that are held to maturity is not a good way for investors to meet their long-term liabilities.  Think pension plans and insurance companies for example.  Central banks are eviscerating them.  How insolvent pension systems and life insurance companies can be good for the global economy is beyond my pay grade, but then again, I don’t have a Ph.D. in economics.

Here at the Economic Prism we don’t get it either.  But what do we know.  Realistically, Yellen will go dumber.  Like her prior two predecessors she’ll do everything she can to bankrupt retirement accounts and pension funds because liquidity trap graphs tell her economic salvation depends upon it.

Good lord!  Now that’s just plain dumb.

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pathosattrition's picture

Watershed moment: do we choose slavery or collapse?

Justin Case's picture

Lets give the wheel of fortune a spin.

nibiru's picture

Then actually something logical may happen. This land is already badly experienced with terrible politicians wielding huge power.


At the end of the day, when Janet is going to meet her friends (Kuroda, Draghi etc) at BIS they will decide another round of central banking going NIRP. Maybe the next one is the FED?

nope-1004's picture

The FED is the largest global threat to peace.  They are a humanitarian crisis of epic proportions.  The FED needs to be destroyed.

And the last rate hike (other than the pretend one in January) was June 2006.  Don't hold your breath.  It's clear the banks are dead and on life support.  Without manipulated zero rates, and now NIRP, they are insolvent.

Here2Go's picture
Here2Go (not verified) nope-1004 Aug 27, 2016 11:49 AM

"The Number One Factor Influencing Fed Monetary Policy"




There, 'fixed' ALL speculation...

manofthenorth's picture

Greed, corruption, self interest, avarice......

so hard to pick just one.


Here2Go's picture
Here2Go (not verified) manofthenorth Aug 27, 2016 12:05 PM

But if you 'END THE FED'... Then... a hell-uv-a-lot-of 'Ashkenazis' would become disenfranchised &/or lose a considerable amount of their PAPER WEALTH & POWER...


So, how can that 'possibly' be a solution (that would not result in a 'SAMSON OPTION')?


Maybe you could ask one of these 3 'high IQ', 'homeschooled', geniuses what they think about it...


~~~DUDLEY & FISCHER~~~ are already there (Yellen is an honorary inductee)


Stanley Fischer(Ashkenazi Jew) – Governor, Bank of Israel; Former First Managing Director, International Monetary Fund


William C. Dudley(Ashkenazi Jew) – President, Federal Reserve Bank of New York; Former Partner and Managing Director, Goldman Sachs



LawsofPhysics's picture

That which cannot be sustained, won't be.  The herd will be thinned regardless, all the hundreds of trillions in paper claims that have been issued and levergaed 10,000x have in fact begun seeking out real assets...

Much nashing of teeth, crying and screaming, but make no mistake, Global Weimar is inevitable...

tc06rtw's picture

The Federal Reserve is of the opinion that
   keeping the economy alive  &
   preventing society’s collapse into war
        and starvation

makes their cause a noble one.
I can see their point,  but I remain unconvinced…

BuddyEffed's picture

I'm sure there was a meeting of the cabal back around 10 years ago where just that point was made and the term "doing God's work" was floated as rationale and raison d'être. But just like so many other things (derivatives, SIV, CREDIT DEFAULT SWAPS) there was overreach and misuse of "doing God's work" too.

Escrava Isaura's picture

The Number One Factor Influencing Fed Monetary Policy


There’s no more growth.


But the population keep reproducing and expecting growth.


So, these three will blow up when facing their Darwinian moment.


Or, are you expecting another outcome?


max2205's picture

The world's 1st Trillionarie will be born in the next cycle by shorting bonds....  bookmark it 

Citizen_x's picture

The US financial systems will break when
the FED say it breaks. NOT before.

They will lean on congress/pres and write
laws so that the FED is absolved of any
wrong doing and any liabilities or clawbacks.

Like Descartes motto...

They print (exclusive sole franchise) therefore
they are (forever impunity).

Central banking history shows us...

OBEY !! ,
or byebye my little nuisance.

Escrava Isaura's picture

Wrong conclusion.


Energy is life’s maker and breaker.


No energy surviving daily life becomes a struggle. Everyday.


BuddyEffed's picture

That struggle will cure so many things. No more routine and endemic obesity, heart failure etc. those things just don't happen when you have to Swiss Family Robinson and hunt and gather and keep from being hunted and gathered.

Escrava Isaura's picture

Wrong conclusion. We don’t face an economic problem.


Energy is life’s maker and breaker.


No energy surviving daily life becomes a struggle. Everyday.




Paul Kersey's picture

Since these guys really don't get it, here's an explanation. Take the US, for instance. The Forbes 400 richest Americans own as much wealth as 61% (that's over 180 million people) of their fellow Americans. Those 400 financial oligarchs would like to own as much wealth as 99% of their fellow Americans. The job of central banks is to enable these garchs to do just that. Consequently, if there is a total crash of the US economy, and the assets of the 99% can be bought for dimes on the dollar, then those 400 garchs, who are sitting on trillions of dollars held in offshore accounts, will buy up those devalued assets at those fire sale prices, and have almost complete ownership of the Nation's wealth. It's the perfect plan for the return of the feudal system, just as long as the serfs don't murder the Lords of Finance that own them.


This explanation may a bit simplistic and somewhat overstated, but this is what has been happening since 1971, when Nixon killed what was left of the US Dollar backed by gold.  Quite simply, the US became a country ruled by a plutocracy, and the middle class has become the debt-serf class.

tricorn teacup's picture

Of course that all fails for the rich if, when the excrement hits the rotary impeller, people decide that their non-monetary assets are worth more than all the dollars offered.

Proctologist's picture

Only an optimist would think they'll give us choices. It will be slavery AND collapse!

The beatings will continue until morale improves !

booboo's picture

Perhaps bankrupting anything that promises a future payout is the plan, you can't be forced to serve your master if you have a stash of perpetual bread.

Think of the most evil government policy, multiply it and you will see your future if this path continues.

ebworthen's picture

Yellen and the rest of the FED know exactly what they are doing - destroying the future for the sake of their bankster masters and their unquenchable greed.

Satan is involved, I have no doubt of that, so realize evil is in charge, not reason or intellect.

chunga's picture

Either Satan or a virulent strain of humanity that digs in deep and goes auto-immune, so the rest of humanity attacks itself but never attacks it.

LawsofPhysics's picture

LOL!  Still accepting fiat in exchange for the fruits' of your labor?  Don't overthink this, if that's the case then the only important thing is who controls the fucking printer!!!!


Please, collapse is fucking inevitable, that's just the laws of Nature and physics. Location, location, location...  ...and a dependable tribe.


Here2Go's picture
Here2Go (not verified) LawsofPhysics Aug 27, 2016 12:26 PM

oh crap... He said "tribe"

Heavenlysunshine's picture

It appears only a huge blood sacrifice will appease ancient Molech or Mars, the Roman god of war.

Duc888's picture



All the Fed can do is peddle debt.  Pure fiat.

Chippewa Partners's picture

Hank Paulson told us that TARP was to save banks and get employment going on. Fucking liar.

Batman11's picture

As Michael Hudson points out, 80% of lending goes into real estate.

Strangely, inflating the price of things that exist already doesn’t create growth.

Fictitious asset price inflation does not create growth.

Asset bubbles collapse and you are back to square one and the only people that benefit are the bankers whose debt is still in place.

Jackagain's picture

I fear that "resilient monetary policy" may be a crashing of the Dollar, a maufactured Civil War followed by Martial Law. (gun grab time)

Been to their Facebook site recently? They are running scared. Alt-media is slowly educating the masses to their extreme evil that's been peretrated on the American people for over 100 years and counting....


I Write Code's picture

>Increased issuances of debt no longer translate into increased economic growth. 

Well, if you borrow and then spend it on hookers and blow, then you can hardly blame the economists.

But there is probably some growth, the problem is it's all in China.  So the debt in the US goes to supporting US citizens who no longer have jobs, but hey that's a growth industry isn't it.

Elco the Constitutionalist's picture
Elco the Constitutionalist (not verified) Aug 27, 2016 1:55 PM

"The Number One Factor Influencing Fed Monetary Policy" that's easy - Jews.

THE DORK OF CORK's picture

Wealth is a flow and it cannot be saved. Spent it must be as it accrues, whether on consumption or on capital outlay designed to produce future wealth. As regards the first, life is consumptionfrom the cradle to the grave, consumption of that pristine flow of energy we owe to the sun. The efforts of the financier and monied person to make life a balance-sheet with the debit and credit sides in agreement are untrue to nature. Life is a continuous expenditure of wealth and in this point again Ruskin, rather than the modern chrematist was absolutely in agreement with science. And, as regards the second, capital expenditure, even though it is designed to increase the flow of wealth, and admittedly, over a certain natural period which is not infinite, it does achieve this object it is expenditure as much as the other. The river of wealth is thus divided, but a part is metered carefully and recorded as an accumulation of capital indebtedness against the community. Scientific men, in the innocence of their hearts and the benevolence of their souls, fondly imagine that by increasing the revenue available for life they benefit the community. But do they? The larger the revenue, and the greater the flow above that required for inmediate consumption, the greater the debts incurred by the community and the impossibility of their ever being repaid. Meantime, though real wealth rots if stored, the meter readings spontaneously bear interest and increase ad infinitum. The principles and ethics of human conduct and convention have their own code and standards, but whatever they may be, they must conform to and not run counter to the principles of thermodynamics. A chauffeur may have a soul above the mechanism of his car, but if it led him to try to run it on already consumed petrol, none the less he would be considered a great ass.


Federick Soddy

Escrava Isaura's picture

Thanks Cork.

Just Goggled Frederick Soddy and I am looking forward to read more of what he has to say.

No doubt that I’ll learn more than a few things.


jm's picture

Economists don't know anything. The smart ones know they don't know anything. Austrians , Keynesianism, neocrap are just the dumb ones that think their version of the faith will save the world. It's a game of privileged mandarins trying to keep their place in the pecking order.

The fed will, in this order

Protect the treasury market
Protect the banking system
Protect their peers' and patrons' jobs

Learn this and you stop following ideology like a cow to the cud and start making money.

Cephisus's picture

Nationalize the Fed

tricorn teacup's picture

Changing who owns the issuance of currency won't change much.  The monopoly issuance of scrip would remain.

Contrariologist's picture
Contrariologist (not verified) Aug 27, 2016 5:33 PM

Very good presentation.

JailBanksters's picture

Instead of blowing 4 Trillion on the already Multi Billionaires, they should send a cheque to every person in the US for once of deal for $15,000, no strings, no tax, just free money.

That would do for the Economy than the 5 Trillion they've allready spent on the Billionaires Club.



JailBanksters's picture

Tough question: Do we helicopter drop money before the election or after the election depending on who wins.