Danielle DiMartino Booth: Don't Count On The Powell Fed To Rescue The Markets

Authored by Adam Taggart via PeakProsperity.com,

The recent gut-wrenching drop in asset prices began on the first day of the job for new Federal Reserve Chairman Jerome Powell.

How is Mr. Powell likely to react to a suddenly sick-looking market? Will he step in forcefully to reassure investors that there's a "Powell put" in place as a backstop?

To address these questions, former analyst at the Federal Reserve Bank of Dallas, Danielle DiMartino Booth, returns to the podcast this week. In her opinion, having studied Powell's previous statements, she thinks those expecting him to continue the market support his predecessors provided will likely be quite disappointed.

Powell appears to be no large fan of continued quantitative easing, and has long been on the record as concerned about the eventual pain its unwind will cause. He very well may resist riding to the market's rescue at this time, allowing natural market forces to finally have their way:

Look, this is a message that market participants do not want to hear: It is not the Federal Reserves job to put a floor under risky asset prices.

Compare and contrast Jerome Powell's silence in the wake of the flash crash on his first day at work to Alan Greenspan -- who got on an airplane the day after the Black Monday crash of 1987, canceling an appearance he was to have made, and reassuring the markets with a statement on Tuesday morning that the Federal Reserve was standing by and ready and willing and available to satisfy any kind of disruption in the banking and financial systems.

That was the day -- October 20, 1987 -- that the Greenspan put was born.

My issue with the mainstream media these past few weeks is that they have been insistent on the fact that there is going to be a Powell put to follow the Greenspan, then Bernanke, and then Yellen put.

I've been pushing back against that conventional wisdom, mainly because of A) the release of the 2012 FOMC transcripts when we finally got to hear words coming out of Powell's mouth which showed that he was no pushover and B) the fact that he worked for a $1 salary to educate the Congress on the perils of the Untied States defaulting on its debt.

Powell himself has stated that he was concerned that quantitative easing would end up being habit-forming for the markets.

So I read his silence these last few days as prudent and cleaving to the original intention of the Federal Reserve being lender of last resort; not babysitter to the stock market.

Click the play button below to listen to Chris' interview with Danielle DiMartino Booth (40m:10s).

Comments

NoDebt stinkhammer Mon, 02/12/2018 - 21:51 Permalink

I want Ben Bernanke back.  That man knew how to fix shit.  If it even SNIFFED funny, he threw billions at it.  THAT is the kind of leadership we need at the helm of the Fed.  The kind of leader who isn't afraid to risk monetary armageddon time and time again to save your 401K's quarterly performance.

 

In reply to by stinkhammer

TedFarr Mon, 02/12/2018 - 21:39 Permalink

What I wonder is even if Powell does not want to back stop the markets, is he the ultimate decision maker here, or does that decision really fall to other more powerful people?

scouzi Mon, 02/12/2018 - 21:57 Permalink

The Greenspan 'message' was not supposed to be released and he was apparently furious. He did not want to say anything of the sort. 

Consuelo Mon, 02/12/2018 - 22:03 Permalink

S&P 2000 and headed south.   That's when resistance becomes futile.

 

You know the old saying ----  When it gets serious, you have to $$$print...

shizzledizzle Mon, 02/12/2018 - 22:04 Permalink

You know, if he actually held people accountable, I would kiss his ass.  2008 was the event horizon. Somehow people still seem to think that financial institutions are holy and if we shower enough money on them somehow everything will improve.

Like someone else said. Until they are afraid for their thoat being cut in public is a sincere concern nothing will change. Imagine if you will a world where no matter the amount of money you push around you suffer the consequences or positive outcome of your decisions in its handling. 

 

MusicIsYou Mon, 02/12/2018 - 22:07 Permalink

Oooo, I'm already getting excited to hear about people who throw themselves off buildings or kill their whole family with a gleam in my eye. I'm getting an erection, how dare you tempt me like that.

I Write Code Mon, 02/12/2018 - 22:08 Permalink

Already have, OMG the aggregates and individual stocks are all being managed.  I can just about duplicate the spreadsheet logic involved.  The trend lines become more the self-fulfilling prophecies than ever before.  Just *how* it is being done, remains a mystery.  But if the Fed or the PPT or Batman had not acted, S&P would be 500 points lower already.  In fact, maybe the Fed or PPT or Batman called for the decline in the first place, to just these levels.

Should begin a nice recovery in about a week.  Trade accordingly.