Fed's Powell Stated The Economy is Solid: Why That Is Fake News

Earlier this week, the WSJ put out an article titled "Powell Says Solid Economy Supports Further Fed Rate Increases", in which it rambles on about how supposedly great the economy is. But how great is it really? 

We are now 10 years post the largest financial crisis in American/world history, and the Fed has just hiked the Fed Funds rate to between 1.75% and 2%. Using historical measures, the current Fed Funds rate is still at crisis levels, or where Greenspan had lowered the rate to following the 2000 collapse. So, after 8 years of ZIRP, and multiple rounds of QE, how is the state of the economy? Well, to start out with, a new record of 95,919,000 Americans are now out of the workforce. Again, some will say that is mainly due to baby boomers retiring, but if one is to look at a chart of workers aged 55 or older who are still working, it quickly dispels that narrative. 

Americans are also in record debt, currently $13.2 Trillion, but the economists say it is nothing to worry about. Meanwhile Americans saving rate is near record lows, with a survey in September of 2016 stating that 69% of Americans have less than a $1000 in savings. In January of 2017, CBS had a article that said a $500 surprise expense would put people into debt. Or more recently, just last month, a Federal Reserve survey found that four in ten Americans can't cover an emergency expense of $400!!!  What does that tell us about the true state of the economy?

Now for some even more disturbing facts about how great the economy is. 43% of American families can't afford basics like rent and food, and that is with 42 Millions Americans currently using Food Stamps (aka SNAP program). And with the second housing bubble in 20 years, thanks to the flawed logic of keynesian central bankers, Americans are paying record amounts in rent. And those who can afford to buy a home or can qualify, are now seeing the highest housing prices since the crisis, despite Fed Chair Powell telling us in March that "The Fed doesn't see housing prices as being too high." A recent Bloomberg article said that Americans are devoting the largest amount of their income to their mortgages, the highest since the crisis. But again, no one dares to call it a bubble or a problem, they assure us that everything is different this time. No journalist dares to question the current state of the economy, or dare to question central bank heads or leaders, they are too busy kissing ass or having barbecues with them. In a stunning article in today's WSJ, Americans are entering their retirements in the worst financial shape than any other prior generation. "In total, more than 40% of households headed by people aged 55 through 70 lack sufficient resources to maintain their living standard in retirement, a Wall Street Journal analysis concluded. That is around 15 million American households."

Meanwhile forgetting about the average Americans, because honestly who gives a shit about them, the rich Americans are even richer now. Not only are there a record amount of billionaires now, the wealth of millionaires has surged to a record $70 Trillion. The only thing that 8 years of ZIRP and multiple rounds of QE, plus a coordinated effort by other central banks around the world has done, is helped out the rich, not to the poor, and not the middle class. Ben Bernanke said during an interview after the dropping the Fed Funds to zero and launching QE, was that the Fed was focused on main street, and not wall street when it came to their policies of trying to "fix" the economy that they destroyed. When he was President at the Dallas Federal Reserve, Richard Fisher said that QE was a massive gift to the rich, intended to boost their wealth. 

So back to the recent WSJ article at hand, Powell is saying the solid economy warrants further rate hikes. The truth of the matter is, the economy is far from solid. The only reason the Fed is hiking rates, at a snails pace, is to try and slow the largest stock market bubble in American history. A stock market bubble so large, multiple Fed governors, chairmen/women, and past Fed officials have warned about on at least 20 different occasions. But is not only the stock market, it is far widespread to many asset classes, homes, art, cars, etc.. The WSJ article quoted Powell as saying: 

"Mr. Powell said he saw few risks of bubbles but flagged how the prior two U.S. economic expansions ended after the eruption of financial imbalances, in the technology sector and the housing market, respectively, rather than overheating from excessive inflation." 

“We have often seen confidence become overconfidence and lead to excessive borrowing and risk-taking, leaving the financial system more vulnerable" 

 

Powell says that he saw few risks of bubbles, but has warned at least twice this year about asset valuations being higher than historical norms. No mention that the reckless policies of the Fed has led to that artificial overconfidence, because as we have seen, the stock market is the Fed's baby, and anytime it has even the smallest drop, the Fed is there to jawbone it higher. Because as Yellen admitted, the Fed Depends on the stock market to gauge monetary policy.

 

 

 

Yup, after looking at a chart above of the SPX, I agree with Powell, I don't see a bubble.....

Then we have Fed talking heads warning about how the Fed tightening will lead to recession. This is partially true, but recession will happen because of the extremely loose monetary policies of the last 10 years. Recession will happen because the Fed waited too long to raise rates from zero, and their joke of .25 bps hikes at each meeting will only make the crash that much worse, because as we are seeing, their joke of .25bps hikes at each meeting has only made risk assets climb even higher. 

 

The economy is not strong, the stock market is. And as they love to say, the stock market is not the economy.....until it crashes and they are "forced" to do bailouts.

 

Comments

Consuelo Fri, 06/22/2018 - 17:31 Permalink

They know, but there is no other way out (TINA) of an economic situation 30+ years in the making, which has resulted in a structural shift away from a savings & production model, to a Debt & Consumption model.   No way out.   Actually, there is a way out, but is your average American - even millionaire no less, prepared to cross that river?

No, they're not.

 

 

Oldguy05 Fri, 06/22/2018 - 19:17 Permalink

Hmm. I pay about $1300 in rent a month for a townhouse apartment that has become almost like living in the projects. I've owned 2 properties that were also my home and very pleasant...and paid less than $600 a month. Granted. I put decent money down and had a decent rate....but WTF is happening now? I can't buy another property today....and live in a hellhole! This is dickinrefuckulous!

Silver Savior Fri, 06/22/2018 - 19:49 Permalink

The bad news is I give the economy overall atleast in the United States a D-. The good news is all this bullshit is unsustainable and will eventually collapse and reset. 

I am hunkering down now and going to come out strong. No flat screen tvs for me. I don't even watch TV. No new cars, no payments, nothing. 

Hard assets! Keyword: Hard!

Son of Loki Sat, 06/23/2018 - 06:34 Permalink

Greenspan, Bernanke and Yellen share the blame for recent destruction of our economy along with the politicians (like Barney frank) who encouraged them.

Instead of fighting for lower costs of essentials (food, housing, etc) people demand higher wages to pay for the overpriced stuff. Worse, some segments are paid astronomical salaries out of proportion to what they are worth. (the fat salaries of the faculty at the Diversity Dept at U Michigan is an example, as are the "teachers" in the Illinois school system some of whose pensions are a whopping $11 million).

 

Chief Joesph Sat, 06/23/2018 - 07:02 Permalink

Powell is just another talking head for the big bankers, who actually controls the Feds.  He is totally oblivious to the real conditions of the American Economy too.  He never made it off the east coast either, so what would he know about the economy in the rest of the country.

Economics Considered Sat, 06/23/2018 - 07:34 Permalink

Consider the absolute reality and 'truth' of the following:

The health of the economy is assessed on a valuation of a ponzi scheme.  And therefore, virtually all of the functional actions of government entities is based on trying to maintain a ponzi scheme (i.e. stock markets).

You think this is nonsense?   You should really really stop and look at the actual reality.

First, you have to see if you can assess rationally or if you are conditioned to necessarily deny rationality/not be able to make a rational assessment.   i.e. SO simple - 1) if the stock markets crashed by 30% in 1 second, what change is there in the total amount of MONEY in the economic system ?   The answer is rationally unavoidable - there is absolutely zero change in the total amount of MONEY in the system.  period.seriously.   2) the stock markets are, from a rational assessment, unavoidably not only a ponzi scheme but a severe ponzi scheme.  (In a classic ponzi scheme, the scheme maintains some trivial balance of money so that occasional redemptions can be made from the 'petty cash' on hand.  In the severe ponzi scheme of the stock markets, there is not even one single penny that can be redeemed.  Redemption is possible ONLY if someone else buys in to pay for the redemption.  So funny - the euphemism for whether someone is willing to buy your redemption is the term LIQUIDITY.   lol lol )

What could possibly happen in an economic system where the system is 'governed/managed/manipulated' based on a ponzi scheme ?    LOL   discuss. 

Addendum.  I would like to assert that I get a LOT of very valuable insights and information from Zero Hedge comment sections.  Truly.  And I really place a high value on that.   But - I get the feeling that something over 95% of commenters are conditioned to not be able to do rational assessments (even though it appears that most are quite intelligent - completely different, heh).  So - 95% - discuss.  I'm interested - what do you think the percentage is ?

Let it Go Sat, 06/23/2018 - 08:07 Permalink

While economic growth appears robust and a solid GDP number can result in a feel-good moment that builds consumer confidence it can also mask growing weakness in various parts of the economy. Quantity simply does not make up for poor quality, we are talking about two totally different animals.

The false narrative that simply growing the size of an economy even by using deficit spending undercuts the importance of a solid economic and the long-term stability of the financial system. The article below delves into poor investments.

 http://Economic Growth Does Not Equal Economic Strength.html

LawsofPhysics Sat, 06/23/2018 - 10:59 Permalink

"Debt does not matter" - Ben Bernanke

"Once unemployment goes below 6.5% we will normalize interest rates" - Ben Bernanke

Certainly Ben would not lie to congress, but if he did then he needs to be executed publicly. Ticket sales alone should cover the debt.

alfbell Sat, 06/23/2018 - 14:56 Permalink

It's not The Fed. It's our universities and their "economics" curriculum is all that is available. It's full of false information, misdirection, ignorance of history and has a strong socialist bent to it. Keep a nation ignorant of the understanding, laws and principles of economics and you can control them. The simple and workable truths are being obfuscated by the powers that be. Nothing wrong with The Fed and its original mandate when it was originally set up back in time (Congress changed--"sabotaged" is the correct word--The Fed's mandate to what it is now.) Don't be misdirected, The Fed isn't our problem. Our enemy is the US government: especially SCOTUS and Congress and MIC and intelligence/law enforcement (notice that intelligence is spelled with a lower case i).

 

Government has grown too too too big. It has become too complicated. We are losing all of our liberties, privacy and freedom. We need a Reformation, or a new evolution.

BareAss Sat, 06/23/2018 - 15:34 Permalink

For the gosh-zillion-th time, when are the posters to this site going to provide charts with logarithmic scales on them?

Every f-ck-ing economic trend of any importance is logarithmic in nature and using a linear scale to support an argument, as above, is -extremely- misleading. 

Why is this the first comment for this post to note this? Are most comments just worthless drivel? If you have gotten this far through the comment list, you (if you have half a brain) have likely already realized this...

Thugocracy Sat, 06/23/2018 - 18:33 Permalink

Silly, psychobabble. They print money to buy votes with because they're incompetent to manage the economy, then hire scribblers to go in back of them and justify. The theories are a red herring on a good day.