"It May Take A Massive Program, Large Enough To Shock Taxpayers" - The Jackson Hole Post-Mortem

Tyler Durden's picture

On Saturday, the 2016 edition of the Fed's Jackson Hole two-day symposium came to an end, and as many expected, following long bouts of rhetoric, circular statements and hollow bluster, much of it contradictory, both the participants and markets remain as confused as ever.

In addition to Friday's Yellen-Fischer one-two knock out punch, below are some of the key quotes, courtesy of Dow Jones:

"In light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal-funds rate has strengthened in recent months."

- Federal Reserve Chairwoman Janet Yellen, Friday, in a keynote speech at the conference:

When asked whether the Fed could raise rates at its meeting next month and again before the end of the year, he said Ms. Yellen's speech "was consistent with answering yes to both of your questions, but these are not things we know until we see the data."

- Fed Vice Chairman Stanley Fischer, Friday, in a CNBC interview:

"We should be on a program of gradual rate increases," though he added, "We can afford to be patient" when it comes to acting.

-Fed governor Jerome Powell, in a Bloomberg television interview Friday:

"If the economy in the next few weeks performs consistent with my sense of the economy, then I think we ought to have a serious discussion at the September meeting" about raising rates.

- Atlanta Fed President Dennis Lockhart, Saturday, in a WSJ interview:

"If we had a lot of good news and we got into the September meeting and other people wanted to go, I could support that--but again I'm talking about one increase and no planned increases after that."

- St. Louis Fed President James Bullard, Saturday, in a WSJ interview:

"The case for raising rates in the near term "has been strengthened."

- Dallas Fed President Robert Kaplan, in a Bloomberg television interview Friday:

"I see a gradual...upward pace in interest rates as being appropriate." As to when the Fed might raise rates next, she said, "I go into every meeting with an open mind."

- Cleveland Fed President Loretta Mester, in an interview with CNBC Friday:

“We will act decisively as we move on... The bank will carefully consider how to make the best use of the policy scheme in order to achieve the price stability target. The “zero lower bound is no longer insurmountable” as a policy constraint “in practice”; “It is natural to assume another lower bound exists,” and the current rate is “still far from such a lower bound

- Bank of Japan Gov. Haruhiko Kuroda said at the conference Saturday:

"Negative rates work and are nothing extraordinary or immoral or absurd."

- European Central Bank executive board member Benoit Coeure, at the conference Friday:

A Fed rate increase "might trigger some reactions from our side, but we will also respond to other determinants of inflation."

- Bank of Mexico Gov. Agustin Carstens, in a WSJ interview Friday:

* * *

But while Wall Street has been busy trying to decipher what all these statements mean for the probability of a future rate hike, and whether one would take place in September, or December, or both, the real message that emerged was one noted previously: a common plea to their colleagues in the rest of government: "please help" as Reuters put it.

In other words, the push for a transition from monetary to fiscal policy was the true agenda behind this year's Jackson Hole.

To be sure, while fiscal policy was not on the formal agenda for the conference, it was a steady part of the dialogue as policymakers thought through policies for a post-crisis world. One of the central worries is that households and businesses have become so cautious and set in their outlooks - expecting little growth and little inflation - that they do not respond in expected ways to the efforts central banks have made.

Or, as the WSJ unexpectedly reported a day before the Jackson Hole start, central banks are now failing, and as even Hilsenrath blasted "years of Fed missteps" have led to populism, and disillusion with the system. The result has been a historic collapse in confidence that the Fed "will do the right thing for the economy."

As Reuters' Howard Schneider summarized in his Jackson Hole post-mortem,  "mired in a world of low growth, low inflation and low interest rates, officials from the Federal Reserve, Bank of Japan and the European Central Bank said their efforts to bolster the economy through monetary policy may falter unless elected leaders stepped forward with bold measures. These would range from immigration reform in Japan to structural changes to boost productivity and growth in the U.S. and Europe."

Without that, they said, it would be hard to convince markets and households that things will get better, and encourage the shift in mood many economists feel are needed to improve economic performance worldwide.


During a Saturday session at the symposium, such a slump in expectations about inflation and about other aspects of the economy was cited as a central problem complicating central banks' efforts to reach inflation targets and dimming prospects in Japan and Europe.

The ECB - currently waging a silent war with Deutsche Bank and Germany over the fate of NIRP - was perhaps the most vocal, after its executive board member Benoit Coeure said the bank was working hard to prevent public expectations about inflation from becoming entrenched "on either side" - neither too high nor too low. But the slow pace of economic reform among European governments, he said, was damaging the effort. "What we have seen since 2007 is half-baked and half-hearted structural reforms. That does not help supporting inflation expectations. That has helped entertain disinflationary expectations,” Coeure said.

What Coeure did not acknowledge is that it is the ECB's role in keeping rates at record low levels as a result of its government (and now corporate) debt monetization that has allowed Europe's government to completely ignore structural reforms. After all, if the market no longer signals a reaction to governmen policies, either favorable or otherwise, what is the point of putting one's political career at risk if interest rates won't budge.

Bank of Japan governor Haruhiko Kuroda followed a similar path and said he is in regular talks with Japanese Prime Minister Shinzo Abe about opening Japan to more immigration and other politically sensitive changes needed to improve potential growth, currently estimated at only around one percent annually. As noted before, Fed Chair Janet Yellen devoted the final page of her keynote talk on possible monetary policy reforms to a list of fiscal and structural policies she feels would help the economy.

Kuroda came very close to also admitting defeat, acknowledging that household expectations have not moved, and said the BOJ was prepared to continue its battle to figure out how to shift them. Essentially, the BOJ will double down on what is now no longer working, but is effectively hurting both the Japanese banks and the economy.

"Japanese inflation dynamics remain vulnerable," Kuroda said. "It could be that long-term inflation expectations are yet to be anchored in Japan" at the bank's 2 percent target.

This, despite, "flooding the financial system with cash, and voicing a steady commitment to their inflation targets" in an effort to make people believe they will be met.  The conclusion one can draw is that while central banks retain some credibility among markets, at least inasmuch as rising asset prices are concerned, the general public now openly ignores any central bank forecasts, and why not: with Fed interest rate "forecasts" such as this one, it is clear that not even the Fed has any idea what is coming.



Where does all this confusion leave us?  According to one economist, what happens next may put the past 7 years of simple "financial repression" and central bank failure to shame: in a lunch address by Princeton University economist Christopher Sims, "policymakers were told that it may take a massive program, large enough even to shock taxpayers into a different, inflationary view of the future."

"Fiscal expansion can replace ineffective monetary policy at the zero lower bound," Sims said. "It requires deficits aimed at, and conditioned on, generating inflation. The deficits must be seen as financed by future inflation, not future taxes or spending cuts."

In other words, openly monetizing the debt with the intent of generating runaway inflation: think helicopter money on steroids, a strategy that ultimately risks the dollar's status as a global reserve currency.

* * *

Is a "shock" fiscal stimulus on the table? As Reuters concludes, "it was not clear whether such ideas will catch on. But there was a broad sense here that the other side of government may need to up its game."

And as central bank policies continue failing, it will. As Deutsche Bank's Dominic Konstam said over the weekend, "we are inclined to expect persistent financial repression with low real rates at least until as and when the US economy slows enough to provoke a reactionary fiscal response."

So there it is: all it will take for central banks to get their wish - world governments shocking "taxpayers into an inflationary view of the future - is for the economy to collapse. Because if the Lehman bankruptcy launched the greatest wealth transfer in history from the middle class to the world's wealthiest, so the next US recession

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Manthong's picture

Helmet head, sweetie… and professor whoever... news flash…

You cannot shock people who have become totally numb because of your and the US government’s stupidity.


jcaz's picture

Hey, ya know what, Janet?  Let's try not "shocking" taxpayers (which we all know is code for "fucking over") and try a rational, balanced, and long-term, non-partisan policy- you know,  the crazy directive the Fed is SUPPOSED to advocate.....

We don't need any more "shocking"- for God's sake, let's leave this '90's Greenspan gibberish behind......

20 years later and she's still trying to cover for the asshole who moved 25 basis points every time a CNBC camera spotted him.....

Infocat's picture

The Situation is ncreasingly getting more worse, wich is propably a good thing! http://www.truthjustice.net/

luckylongshot's picture

Stupidity is not a strong enough word- trying to fix the problem of too much debt with more debt would be stupid if it were a strategy that a five year old proposed. However for a grown up to propose it, when the problem has occurred 775 times before and has only ever been fixed by debt write offs, is beyond stupid. The chairwoman of the fed is obviously a lunatic!

Doom Porn Star's picture

IF you continue 'shocking the taxpayers' the taxpayers are fully within their rights to hang you oppressive assholes from the nearest lamp post.

A cattle prod is usually employed to shock cattle into doing what they do not want to: such as going up a ramp into a slaughterhouse.  -The cattle instinctively do not want to go into the ( unsafe ) slaughterhouse, and they will not go willingly where no good end can come to them.  

People are not cattle.

IMHO, punishing people in order to force the people into allowing themselves to be further oppressed/destroyed in order to enrich/sustain others is not a morally defensable position.

The 'elites' have no right to punish other people -entire populaces- for refusing to do as they command.   There is absolutely no legitimate argument in favor of any such arrangement..

Get your boots off our necks or we are going to rise up and dismember the lot of you!

spqrusa's picture

Hmm.. Been waiting to see the sheeple rise up against their oppressors... Crickets...

Withdrawn Sanction's picture

"Hmm.. Been waiting to see the sheeple rise up against their oppressors... Crickets..."

You've been waiting?  Waiting for what?  If you're so disappointed in other people's failure to live up to your standards, why not blaze a trail and show us the way, Sarge?  

spqrusa's picture

Haha. You are projecting.

The sheeple will sleep because they were designed to sleep. The people must sleep for us to live. Go figure.

Offthebeach's picture

We have a world of free riders/grifters. Anyone who revolts against the system, even symbolic and peacefully will attract the full weight of the security services of the state, like Ruby Ridge, Waco. Even the Amish, and the like are to be watched as they prove there is life outside the state, thus undermining the cradle to grave state.  I would imagine the Prepper movement would be on the threat radar.

gatorengineer's picture

Its certainly not ignorance nor stupidy.  This is the transition to globalism.... Hyper inflation, would make 90 percent of the people reliant on the giverment.

atthelake's picture

And unable to pay taxes, electric, rent, etc

August's picture

>>>Its certainly not ignorance nor stupidity.

In the past, and repeatedly, entire nations or regions were put to the sword for their failure to embrace the True Faith.  Our current rulers have Faith that humankind is perfectable and, since they are far more insightful, more perfect, than the common man, it is their duty to guide all of us.  And it pays well, too.

For the Greater Good, therefore, they will indeed kill us all:  1) if they think they need to... and 2) if they can. 


Withdrawn Sanction's picture

It ought to be obvious by now to even the dim bulbs at the Fed that you're not going to get hyperinflation or even inflation.  ZIRP and NIRP destroy monetary values (do the discounting arithmentic yourself, it's not difficult).  In a word, such polcies are deflationary. Doubling down on a failed policy only accelerates the approach towards the abyss.  

Ironically, however, even were they to raise rates, that too would be deflationary, as it would impair financial asset values by loweing the values of bonds, CDOs, etc.  Once a good chunk of the debts were revalued, a healthier system could emerge, but apparently that's not wanted. 

stocker84's picture

You'd think zero hedge would block this effin spammer with his "I made such and such money from scamming people." He posts the same stuff...a simple script would do, for crying out loud. And what does that tell other spammers? It says, "Feel free to post here, where incompetent but you can count on us for that!"

Ward no. 6's picture

lol but hey maybe they hired him/her to do this and that is why they don't do anything about it...

rubiconsolutions's picture
"It May Take A Massive Program, Large Enough To Fuck Taxpayers"


There, fixed it.

conscious being's picture

Again. You forgot the 'again' part.

JRobby's picture

Shock? Taxpayers? WTF does that mean? Do they think a tax cut will stimulate spending? Not at this point. Spend your tax savings on Gold! (Weather you bother to pay them or not!)

broly's picture

i thought we were going to call her granny grayhead? loll

w/e works for you works for y'all works for me.

HardAssets's picture

Pickpockets don't accidently grab your wallet.

These grifters have been running the biggest con in history for at least a hundred years.

conscious being's picture

In fact, they made so much in FRN terms, that they can now pay to spread the meme that it was all an accident.

"Give me control of a nation's money and I care not who makes it's laws"

sschu's picture

So we go from believing Janet etal to putting our fate in the hands of Hillary/Trump/Ryan/Pelosi/Mitch/Reid.

Does not sound very promising.


Berspankme's picture

Most valuable shock would be to end the fed and turn it over to Mr. Market. He's always right

the grateful unemployed's picture

you mean give it to the market where the 1% have 99% of the assets, where the SNB is buying up the US stock market (as a surrogate for whom do you suppose?) you do want that wild west show until the animal spirits have been dissipated and tamed

Doom Porn Star's picture


conscious being's picture

Central Planning = Croney Loot-fest.

Tinky's picture

I believe that "fuck me sideways" provides at least as much insight into the current state of the economy, and possibly more than the quotes emanating from Jackson Hole.

nmewn's picture

And just to think, when for years we told you that these people are quite literally insane you called us crazy...lol.

Herdee's picture

I agree,make out the government cheque so it is large enough to make a decent gold and silver purchase.

dogismycopilot's picture

is it me, or does Yellen's hair do make her look like a circumcised penis? 

SoilMyselfRotten's picture

Then what was Bernankes' excuse for looking like a penis?

STP's picture

Janet looks like, what I imagine the Pillsbury Doughboy's Bitch would look like.  She's got the same fat, doughy face, except she's far from cute.

SoilMyselfRotten's picture

The dough boy isn't as white and pasty

conscious being's picture

After the collapse, when the Fed is dead and buried, prosperity will return, until everyone who can remember dies off. Then they'll slowly bring it back to life and start the enslavement process all over again.

thomasincincy's picture

Anybody up for a game of cornhole?

messystateofaffairs's picture

Yaady, yaady' yaady, yaady; just shut the fuck up and die already.

bh2's picture

A bigger shock is all that will save us: End the Fed

Baby Eating Dingo22's picture



They want to shock people into buying shit they don't need today with money they don't have so they don't have to pay more tomorrow

"The sheep aren't responding"


One of the central worries is that households and businesses have become so cautious and set in their outlooks - expecting little growth and little inflation - that they do not respond in expected ways to the efforts central banks have made.

robertocarlos's picture

Drop enough pallets of fresh 100s and they could take care of two problems at once.

the grateful unemployed's picture

yes and outlaw the 100 effective jan. 1 and do mass drops on labor day, that should get consumer spending off the snide

the grateful unemployed's picture

and if inflation expectations where higher what would investors do? chase yield and take on more risk. fine lets have another round

khakuda's picture

These idiots truly believe that there is an underlying demand problem when every garage in the country is filled with tons of unused made in China crap. How many cars, smart phones, computers, flatscreen TVs do people need and how much room do people have to store them? Prepaying my utility bills doesn't protect me from any inflation, so no need to do that. I can't store fresh produce more than a week or two. I only have enough room in my freezer to pre-buy ice cream. I'm not going to store gasoline on my property. I can't prebuy healthcare or get sick now because the price of getting care will be going up in the future. The Fed wants everybody to pre-buy things they will need or want on the expectation of the prices will skyrocket. The whole policy of creating inflation has been to pull demand forward and not worry about demand tomorrow. It is tomorrow. The only thing you can pre-buy are assets and asset prices are already inflated. I can't buy the next five years of cable TV service at current prices but I can buy the stock in the company that provides service as a hedge.

These monetary policies only inflate asset prices.

the grateful unemployed's picture

bob prechter, two jaguars, google it

khakuda's picture

Thanks, I had not seen that. Exactly right.