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Should the Fed be Dead?

John Rowland

Posted on March 15, 2020 22:45

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Through all of their lies, even central bank monopolists eventually say something true. After having so done back in 2000, it can be said that Alan Greenspan blinked.

Central banking monopolists typically deal in tired, discredited platitudes. These bromides are usually designed to emphasize their desire for such monopolies to continue into perpetuity. Their keyword of choice is almost always "independence," meaning: "leave our monetary monopoly alone."

Alan Greenspan took the helm as Chairman of the Federal Reserve in August 1987. During his tenure, he managed to actually veer into the truth during one FOMC meeting on June 28, 2000, saying: "A decision to base policy on measures of money presupposes that we can locate money. And that has become an increasingly dubious proposition."

This was brought to light by Jeff Snider of Alhambra Investments. Pursuant to this, David Stockman, President Reagan's Director of OMB, has pointed out that the Fed's continued operations amounted to a paradox of "conducting monetary policy without the medium of money."

That Greenspan himself had recognized the end of an era – the era of University of Chicago School-style monetarism – should have given "the denizens of the Eccles Building" great pause.

The Fed was at a point where it could "declare victory" and basically go away as it was clearly evident that (due to technology and the practice of "sweep accounts") a central bank was no longer needed; no need for a "reserve requirement for checking deposits" which would obviate the need for commercial banks to hold reserve deposits at the Fed.

But instead of going away, the Greenspan Fed blinked. The "Greenspan Fed simply abandoned Money and wholeheartedly embraced Economy" – the extension of its parasitic tentacles to "every asset class in the entire financial system, as well as all the economic highways and byways of main street America." This enabled all manner of continued carry trade speculation; more generally, gross market distortions through a complete lack of honest (interest rate) price discovery.

Call it the empowerment of "Wall Street gambling rot."

While this abandonment of money occurred nearly 20 years ago, we are definitely still feeling all of the negative fallout. Witness the record-setting volatility in the markets over the last couple of weeks; how the Federal Reserve's falsification of interest rates – its socialism – leads to a Fed-created bust. And of course, everything and everyone will be blamed for the market turmoil, except the Fed and its massive debt creation.

As this observer noted back on June 25, 2018: "monetary central planners and all of their dutiful enablers would find someone or something else as a necessity to blame for their deeds ... the monopolists always do." But on March 3, we saw the Fed playing catch-up with the market by cutting the short-term federal funds rate by 50 basis points – desperately attempting to manipulate the yield curve.

Today, the Fed cut rates to near zero, as this economist predicted nine months ago. This analyst asserts that the Fed can't save us.

At the end of the day, true price discovery is critical. Let the market determine these natural levels; not any central planning monopoly.

John Rowland

Posted on March 15, 2020 22:45

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