"Jerome Is The New Janet" - Stockman Rages At The Fed's Systematic Lies

Authored by David Stockman via Contra Corner blog,

The election of 2016 was supposed to be the most disruptive break with the status quo in modern history, if ever. On the single most important decision of his tenure, however, the Donald has lined-up check-by-jowl with Barry and Dubya, too.

That is to say, Trump's new Fed chairman, Jerome Powell, amounts to Janet Yellen in trousers and tie. In fact, you can make it a three-part composite by adding Bernanke with a full head of hair and Greenspan sans the mumble.

The overarching point here is that the great problems plaguing American society---scarcity of good jobs, punk GDP growth, faltering productivity, raging wealth mal-distribution, massive indebtedness, egregious speculative bubbles, fiscally incontinent government----are overwhelmingly caused by our rogue central bank. They are the fetid fruits of massive and sustained financial repression and falsification of the most import prices in all of capitalism-----the prices of money, debt, equities and other financial assets.

Moreover, the worst of it is that the Fed is overwhelmingly the province of an unelected politburo that rules by the lights of its own Keynesian groupthink and by the hypnotic power of its Big Lie. So powerful is the latter that American democracy has meekly seconded vast, open-ended power to dominate the financial markets, and therefore the warp and woof of the nation's $19 trillion economy, to a tiny priesthood possessing neither of the usual instruments of rule.

That is to say, never before in history has a people so completely and abjectly surrendered to an occupying power---even though its ostensibly democratic government already possessed all the votes and all the guns.

So it is no exaggeration to say, therefore, that the Fed is an alien state unto itself. That was powerfully symbolized most recently by the appointment of John Williams, a lifetime apparatchik at the San Francisco Fed, to the job of head satrap at the central bank's Liberty Street outpost in the heart of Wall Street.

In the scheme of things, the President of the New York Fed is #2 in the whole central banking apparatus, and as such is immensely more powerful than any Senate Committee Chairman or House Speaker. But Williams' appointment was not reviewed or passed upon by a single elected official accountable to any voter anywhere in the US of A.

Yet here is an academic scribbler so out of touch with reality that he advocates raising the Fed's inflation target to 3% because it's purportedly good for American workers; and who for nearly 100 months also voted to keep interest rates pinned to the zero bound even though it was crushing savers and retirees.

Worse still, Williams advanced these oppressions of the people because he claims to have espied an invisible thing called "the neutral rate" of interest that no saver or borrower in America has ever seen and that no free market would ever produce. That's because the only true interest rate is the market rate at any given moment, not the artifacts pegged by the FOMC and the imaginary "target rate" from which they are derived.

If Dr. Williams ever had to defend slashing the purchasing power of worker paychecks, transferring wealth from retirees to the banks and worshipping a tiny interest rate number that no one can see, do we think he could get elected dog catcher, even in San Francisco?

No, we do not!

To be sure, unlike the case of the 12 regional Fed presidents, 7 of the 12 members of the ruling FOMC are appointed by the President and confirmed by the Senate. But the fact is, the Big Lie is so deeply rooted in the political system---including the GOP which is supposed to be the party of free markets and sound money----that these appointments are drawn from a narrow circle of Keynesian economists, bankers and government careerists, making the democratic review process entirely pro forma.

For crying out loud. The Donald came to Washington threatening to drain the swamp and ended up appointing to the one job that could have made a difference a crony capitalist Keynesian who was literally born and bred in the Washington DC Swamp and never left it during his entire adult life.

Needless to say, the Big Lie in question is four-fold. The central bank and its retainers and Wall Street beneficiaries claim that:

  1. the free market has a death wish and tends toward cyclical instability, recession and even depression without the guiding hand of the state and its central banking branch;

  2.  when capitalism is plodding forward on its own energy during periods of business expansion, it's the result of the Fed's beneficent ministrations;

  3.  when the Fed's serial financial bubbles finally implode, the blame lies with the very speculators it enabled and financed with cheap carry trades, falling cap rates and price-keeping operations ("puts"); and

  4.  notwithstanding the occasional externally caused financial bust, the mainstreet economy is always getting stronger and more prosperous because the FOMC is deftly guiding it to just the right balance of "full-employment" (vaguely defined as +/- 4% on the U-3 unemployment rate) and "full-inflation" (precisely defined as 2.00% on the PCE deflator---after excluding food, energy and other subjectively identified price aberrations).

It is to the latter risible narrative that we turn today in rebuke of Jerome Powell's positively deceitful speech on "The Outlook for the US Economy" recently delivered to the Economic Club of Chicago.

According to the new Janet:

At the Federal Reserve, we seek to foster a strong economy for the benefit of individuals, families, and businesses throughout our country....After what at times has been a slow recovery from the financial crisis and the Great Recession, growth has picked up. Unemployment has fallen from 10 percent at its peak in October 2009 to 4.1 percent, the lowest level in nearly two decades. Seventeen million jobs have been created in this expansion, and the monthly pace of job growth remains more than sufficient to employ new entrants to the labor force. The labor market has been strong, and my colleagues and I on the Federal Open Market Committee (FOMC) expect it to remain strong. Inflation has continued to run below the FOMC's 2 percent objective but we expect it to move up in coming months and to stabilize around 2 percent over the medium term.

Beyond the labor market, there are other signs of economic strength. Steady income gains, rising household wealth, and elevated consumer confidence continue to support consumer spending, which accounts for about two thirds of economic output. Business investment improved markedly last year following two subpar years, and both business surveys and profit expectations point to further gains ahead. Fiscal stimulus and continued accommodative financial conditions are supporting both household spending and business investment, while strong global growth has boosted U.S. exports.

Essentially, there is not a shred of truth in the entire passage unless you want to play 6th grade games with short-term deltas in the vaunted "incoming data".

But apply any concept of context and notion of reasonable time duration to any of the bolded assertions and you see that Powell is either a fool or so doped-up by the Keynesian Cool Aid that he speaks jabberwocky without even knowing it.

We'd like to think it's the latter, but anyone who starts with an assessment of the US economy by citing the 17 million jobs number is actually giving Donald Trump's daily twitter spinning a run for the money. After all, 7 million of that number consists of born again jobs that were wiped out during the deepest recession of modern times, and have only been slowly recovered during the 9 years since.

And if you want to count from the bottom (February 2010),  you will find that among the full-pay, full-time jobs in the goods-producing sector, the loss between the pre-crisis peak of 22.02 million jobs and the February 2010 bottom was 4.4 million jobs or 20% of the total.

But here's the thing. As of last Friday's report for March 2018, only 2.9 million or 65% of the goods-producing jobs shed during the recession have actually been recovered. The productive core of the US economy, therefore, is still 1.5 million jobs short, meaning that many of the "born again" jobs Powell was crowing about have actually been reincarnated as burger-flippers at McDonald's and bed-pan changers in the nursing homes.

Self-evidently, what our chief monetary central planner should have noted is that even on an aggregate basis----quality mix deterioration aside---the jobs market is not "strong"; it's failing badly.

Thus, between the November 2007 cyclical peak and March 2018, the US economy generated only 9.9 million jobs. That amounts to only 80,000 per month and annualized growth rate of just 0.67%. By contrast, the adult civilian population grew by 24 million during the period or by 194,000 per month.

How this squares with Powell's claim that "job growth remains more than sufficient to employ new entrants to the labor force" beats us, but that's not even the most important point.

To wit, an economy lugging $68 trillion of debt, facing a baby boom retirement tsunami and heading fast towards fiscal bankruptcy needs a much stronger growth of labor input than 0.67% per year---when even that anemic growth rate was largely comprised of part-time, low productivity headcounts.

By comparison, from the June 1990 peak through the November 2007 pre-crisis peak (two full business cycles), the US economy generated 136,000 jobs per month (28.4 million total) representing an annual growth rate of 1.33%. That was double the post-crisis growth rate that Jerome was gumming about at the Chicago Economics Club.

And if you scroll back one more cycle to the June 1981-June 1990 Reagan/Bush expansion, job growth averaged 170,000 per month. Moreover, given the smaller size of the labor force back in the 1980s that computed to a 2.05% per year growth rate.

So rather than a "strong" labor market, what we really have is one that is failing miserably. As Jeffrey Snider so cogently pointed out after the March jobs report, there are actually 16.6 million "missing" workers. Indeed, after 24 million of population growth since November 2007, the US has generated only 5 million full-time jobs.

Actually, it's worse when you look at the composition of even the 5 million "FT" (full time) jobs shown above. Since the day Bill Clinton shuffled out of the Oval Office (January 20, 2001), the US economy has generated only 606,000 new "Breadwinner" jobs. That is, full-time, full pay jobs with an ability to support a $50,000 per year wage.

Folks, if you want to call that "strong" you have apparently invented a new language because the trend gain computes to just 2,914 new Breadwinner jobs per month!

Stated differently, since January 2001 the US has generated just 15.4 million new jobs and 96% of them have been in the Part-Time Economy ( leisure, hospitality, retail, temps and other gig-oriented categories) or the HES Complex (health, education and social services).

That is to say, job growth has overwhelmingly been in the low pay and low-productivity employment that most definitely does not fuel the sustainable growth potential of the main street economy; and which also is heavily dependent upon the fiscal largesse of a government that is tumbling into fiscal collapse.

As they say on late night TV, however, that's not all, and it's not even the half of it. The Fed heads have been reduced to obsessing about the BLS' virtually worthless jobs reports because the other economic indicators are even weaker on a trend basis.

For instance, manufacturing output is still well below its November 2007 level, and labor productivity has grown at barely 1.0% per annum, or less than half the 2.2% rate clocked between 1954 and the year 2000.

Then there is the risible point about an export recovery. From exactly what Powell did not say and here's why: US exports simply made a round-trip during the global commodity mini-cycle from their mid-2014 highs to a bottom in the spring 2016 and then back essentially to where they started; and that's notwithstanding the one0time 2016-2017 surge of credit-fueled demand emanating from the Red Ponz1 that accompanied the run-up to Mr. Xi's coronation last fall.

The truth is, exports during the most recent month were almost exactly where they were 6 years ago in September 2012, and that's not any kind of rebound!

Finally, there is the disastrous performance of the most important economic metric of all: The rate of net investment in fixed productive assets. We do not know what Jerome has been smoking to support the claim that net investment has recovered strongly, but whatever the substance, it is clearly hallucinatory.

In fact, real net business investment was still 28% below its year 2000 level as of 2016, and last year (2017) the number (which the St. Louis Fed has not yet posted) actually went down.

Call the Powell speech what you will, but we think it's just more jabberwocky designed to rationalize an illicit central banking regime which is rotten to the core.

Needless to say, when an unelected, all-powerful arm of the state lies to the people systematically there has got to be a con job in there somewhere.

And this time even Wall Street has lost track of the scam.


Deep Snorkeler Arnold Wed, 04/11/2018 - 11:22 Permalink

The tax cut for the wealthy and the

massive increase in military spending signed

into law last month is the final nail in the Empire's coffin.

America's descent accelerates -

your lifestyle cannot be maintained.

Global wage pressures and the robot horde

will finish you off.

In reply to by Arnold

Ophiuchus Wed, 04/11/2018 - 11:08 Permalink

There is truth and there is untruth, and if you cling to the Feds truth even if it seems contradictory to that of the conscientious thinker, you are not crazy. Embrace Big Brother. He loves you and wants the best for you.

Now come here and take this dollar. You want this dollar! You need this dollar! Get back to work because your country needs you!

Let's sing.............

My country, 'tis of thee,

Sweet land of liberty,

Of thee I sing;
Land where my fathers died,
Land of the pilgrims' pride,
From ev'ry mountainside
Let freedom ring!



gdpetti Ophiuchus Wed, 04/11/2018 - 11:32 Permalink

Truth and untruth... or esoterically, That which IS and that  which is NOT... the positive and negative or  mirror image so that the truth can 'know itself'

This current Fed chief doesn't matter, none of them really do, they just follow orders or 'suggestions' by their 'betters', managers, sensei, patrons, etc... The game is 'out with the OWO, in with the NWO'.. so who cares about debt, responsibilities, et al? None of that matters when this OWO ship is being sunk on purpose... same script as is used everywhere else... no special treatment needed for the home market.

In reply to by Ophiuchus

TheABaum Wed, 04/11/2018 - 11:10 Permalink

All economists are "academic scribblers".


It isn't for nothing that Ronald Coase coined the phrase "blackboard economics" or that Nassim Taleb speaks of the "ludic fallacy".


They are all frustrated physicists, trying to make people and economics follow equations the way inanimate objects do. 


We should remember that Greenspan was once an Ayn Rand acolyte, but became a deep state tool @ the Fed. Incentives matter. 



Liberaldisdain Wed, 04/11/2018 - 11:10 Permalink

Stockman is a moron. Been calling for a crash for a decade. If you had listened to him you would have missed the entire bull run. And if the market tanks tomorrow it does not make him right, 10 years later. 

Stuck on Zero Wed, 04/11/2018 - 11:11 Permalink

All our problems are created by the Central Bank? I don't think so. Congress and the Whitehouse are at the center of corruption, overspending, ginormous debt, militarism, destruction of the Constitution, and perversion.

shizzledizzle Wed, 04/11/2018 - 11:16 Permalink

No shit. LOL, I know most on here want to believe that there will be come concerted effort to tank the economy on Trump's watch... But the fact is they got too good a scam going to let their distaste for Trump mess it up. Would you stop taking large sums of free money just to spite someone? No and they won't either. Powell just picked up where Janet left off.  That being said they will completely blame Trump if they lose control but that is not the plan nor the objective.

Consuelo Wed, 04/11/2018 - 11:18 Permalink

"...and therefore the warp and woof of the nation's $19 trillion economy, to a tiny priesthood possessing neither of the usual instruments of rule."


I saw what you did there David Stockman.   Nice...



gmak Wed, 04/11/2018 - 11:19 Permalink

Why does anyone bother writing this type of article, anyway? You're either preaching to the choir or ranting at those who don't really care. 


Be like mammals among the dinosaurs. Find those little niches to hide in and survive - and watch the coming of the meteor.

To Hell In A H… Wed, 04/11/2018 - 11:22 Permalink

What else can the FED say? Tell the truth? Say how they have robbed the American people blind? That they have enriched a kabal of Jews and treasonous Goyim, while the rest have been fucked in the arse and indebted for life? That they have printed the dollar into oblivion? That our FIAT money system is a ponzi scheme that is going to implode badly, while the architects use their dual citizen Israeli passport and fuck off to pastures new? That the emperor has no fucking clothes?

So yes, the FED has to fucking lie and lie big and lie all the time, while preaching in the media and to the world about financial stability and financial responsibility. Playing by the rules are only for 3rd and developing worlders. We can make up and change the rules when and how we wish, because we are exceptional.

moonmac Wed, 04/11/2018 - 11:34 Permalink

Jesus never understood that buying the animals, caring for the animals and selling the animals was a lot of hard work for the Money Changers at the Temple. Today’s Money Manipulators, Stock Pumpers and Profit Skimmers just get the Fed to create artificial “Wealth Effects” to become rich beyond belief.

atlasRocked Wed, 04/11/2018 - 11:38 Permalink

Wall Street is not lost, David - they are part of the con job.

Once fooled, twice a fool, 3 times a con man.

That’s because no one likes to talk about how socialism rewards the left-leaning industrial and tech billionaires to support the agenda with huge subsidies to medicine, insurance, education, banking, education, pharmaceuticals, recreation, food, health insurance, education, transportation and media.   Oh, don't forget education.

This is why we need a ConventionOfStates.com.

khakuda Wed, 04/11/2018 - 11:51 Permalink

All you have to know to realize the game is that the debt keeps rising faster than GDP.  All the Fed has done is borrow from the future and enable government spending and deficits through artificially low rates.  Why should government ever shrink if there are no economic consequences.  The Fed ensures there are never economic consequences to fiscal profligacy.

Every year, the US government adds another $8,000 in debt per taxpayer to the current $174,000 already owed.

khakuda Wed, 04/11/2018 - 11:53 Permalink

Every year, the government adds $8,000+ to the current $174,000 debt owed by each US taxpayer.  The Fed is enabling unsustainable spending and growth in the government by removing the economic constraint of higher interest rates.

sonya55 Wed, 04/11/2018 - 12:26 Permalink

First thing after reaching Upper levels or power in Fed.Gov, of Fed.Bank is to be blackmailed or replaced with a Clone or both. Pod People United.



Ron_Mexico Wed, 04/11/2018 - 12:30 Permalink

At the risk of sounding like the "Get off my lawn" guy, I have to note the following.

A. Central bankers are NOT the source of all your problems.

B. Congress is NOT the source of all your problems. And if they are, you elected them. Ditto for the Orange One.

C. Hubris, arrogance, and plain laziness are the source of nearly all problems in this country today.  (Dare I mention godlessness?) We think we are the sovereign masters of the world and don't have to discipline ourselves and compete like everybody else on the planet.

D. Lack of responsibility, accountability, and shame have resulted in large part from item "C" above. This accounts for much of the something-for-nothing mentality and outright lawlessness that we see.

 . . . and that's all I have to say about that . . .

Bemused Observer Wed, 04/11/2018 - 12:43 Permalink

Everything is a lie these days! Financial statistics, foreign policy, domestic policy, the 'crisis du jour', the political 'divide'...it is all fraud...smoke and mirrors.

An example...You are told there is some 'crisis'. You are given statistics and told that these PROVE there is a crisis. Because there is a crisis, you must pay more and give up rights.

And no one ever, EVER challenges the statistics. Everything that happens after depends on your believing those statistics are true, and because you choose NOT to challenge, it always goes the same way.

'They' tell you there is an opioid crisis. "Look!", they say, "Look at these statistics! The number of prescriptions being written has gone up! By a lot! That means TROUBLE!"

Ummm, no, no it doesn't. If you take a minute to catch your breath, you'd see that the uptick has a direct relationship to 1) The aging of the largest demographic group in human history, the Boomers. And 2) Decades of returning war vets, coming home with catastrophic injuries. I mean seriously, common sense tells you that these folks are going to use a lot more pain meds than you or I. In fact, Big Pharma introduced the new Franken-drugs specifically to capitalize on these trends, but fucked up the marketing and got too aggressive.

But still, you believe there IS an opioid crisis, because all these real smart folks SAY so. So you'll allow them to fuck up your health care system, add a whole new layer of grifting through all the 'rehab services' that you'll pay for with ever higher premiums even while you yourself can't get treated for simple pain. You'll allow govt. jackboots to paw through your private health records, for 'the chilrun', and to demand you pee in a cup to access an increasing number of services, even for the right to hold a job. And you'll give them billions of your own tax dollars to 'fight the war' on opiates and pass draconian new laws named after their constituent's dead children..."Billy's Law will be an important new weapon in the war against opioids. By requiring all opiate users to come to the police station and take their pills in front of an officer after passing urine and blood screening and watching a 15-minute video on the horrors of drug addiction, we are taking a bold new step forward in blah, blah, blah..."

But you will never question the statistics they give you, even when you have good reason to. Even when the lies are right there in front of your face. And even when you know for a fact that little Billy had a LOT more going on than pill-popping, and maybe if you had to live with those parents of his you'd kill yourself too. It would not be considered politically correct to point that out, or to ask whether a new law was even needed here...surely Billy's situation could be handled using one or more of the existing laws?

Notice how people who interview famous folk NEVER ask the most important questions? And how reporters at press conferences do the same? What reporters ever demanded the specific evidence of "Russian hacking" from the people who were insisting it happened? Why has no one ever challenged the opioid crisis by bringing up the Boomers and vets, or the rationale for approving high-dose synthetic opioids as 'walking around meds' in the first place? Why were the Brits so adamant in their refusals to provide specifics before condemning Russia for a "horrific GAS ATTACK" that didn't even kill the intended targets? Why do any discussions over national tragedies always follow the same basic trajectories that start with the assumption that some specific hot-button issue was the only possible cause? Why don't folks ever QUESTION these asserted 'facts'? They'll show a chart that 'proves' unemployment is 'down' because UI claims have fallen off dramatically...but NO ONE ever mentions the fact that you have to have enough work credits to file a claim, and obviously there hasn't been enough time for any of them to earn those credits since the last wave of job losses, and so they wouldn't be ABLE to file in order to show up on that chart...a different metric is surely called for here? So why do they KEEP FUCKING USING IT? Shut UP with that fucking chart already! It doesn't prove SHIT!

This deliberate stupidity by both the leaders and their people is the real 'global pandemic' that will be the slate-wiper for our kind. If you don't have a proper grip on reality, you won't end well. And I think our digital world with its virtual reality has led us to believe we CAN control our world as easily, leading us to apply the same foolish and irresponsible techniques, with catastrophic results when slam into the very real, solid metal guardrails of life that we forgot were STILL THERE AND FUNCTIONING.

Never ignore the facts, or forget the reality.