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The Fed: Damned If They Do, Damned If They Don’t… Damned Straight

By David Stockman  |  December 19, 2018

Thus did a handful of rapacious citizens come to control all that was worth controlling in America. Thus was the savage and stupid and entirely inappropriate and unnecessary and humorless American class system created. Honest, industrious, peaceful citizens were classed as bloodsuckers, if they asked to be paid a living wage. And they saw that praise was reserved henceforth for those who devised means of getting paid enormously for committing crimes against which no laws had been passed. Thus the American dream turned belly up, turned green, bobbed to the scummy surface of cupidity unlimited, filled with gas, went bang in the noonday sun.

– Kurt Vonnegut, God Bless You, Mr. Rosewater (1965)

The last thing America needed at this moment in time was a conservative/populist/statist/nativist in the White House.

Indeed, it’s proven to be no alternative to the Welfare State/Warfare State/Bailout State status quo.

We’re still on course for imminent fiscal and economic catastrophe…

And it should be clear now that “Bannonized Trumpism” or “Trumped-up Bannonism” essentially boils down to more of the duopoly’s status quo.

That’s more military adventure (this “wag-the-dog-in-reverse” announcement about an immediate withdrawal from Syria notwithstanding…)

And that’s more “easy money”…

Jerome Powell and the Federal Reserve followed through with another 25 basis point increase to the federal funds target range today. And they did retreat a bit from their 2019 rate-hike program.

But Wall Street still didn’t like it. And the Tweeter-in-Chief will follow the Dow Jones Industrial Average.

The Dow was resting at its intraday highs just before the Fed’s 2 p.m. EST announcement. And it dropped about 350 points in the 15 minutes after it.

So, stay tuned for more “Jay”-bashing…

Imperial Washington’s hand was already visible enough in traditional domestic and foreign matters when Steve Bannon arrived at Trump Tower in August 2016.

Now, it’s driving politicization even deeper into our culture and commerce.

His ersatz nationalism and the Donald’s preternatural strongman bombast proved a potent combo in November 2016.

MAGA appealed to Main Street. An Imperial Washington-erected moat to hold back the tide and a new sheriff in the Oval Office with the right “smarts” would have us “winning” all over the world.

Never mind the content-free notions that animated the campaign.

As we’ve often noted, he’s wrong that America’s fall from greatness is down to “bad deals.” He’s right about stupidity and corruption Inside the Beltway; but they didn’t do this.

This economic malaise – if not outright decline – is not due to some kind of global grand theft of America. The Donald had it upside down.

The real problem, in fact, is not the evil flowing into the American homeland from abroad.

It’s not imports, it’s not illegals, and it’s not terrorists.

It’s the outward flow of monetary and military imperialism. That’s what’s killing prosperity at home and generating blowback from abroad.

Indeed, the real culprits behind Main Street’s malaise are the Federal Reserve and its monetary central planners.

It’s their Bubble Finance that enriches Wall Street, depletes the real pay of workers, and sends jobs overseas with an absurd 2% inflation target.

It guts investment by Corporate America because it incentivizes CEOs and CFOs to strip-mine balance sheets and cash flows for Wall Street-pleasing buybacks, dividends, and M&A.

The Fed’s “wealth effects” policies have fueled the greatest financial asset inflation in recorded history. It showered the top 1% and the top 10% with upwards of $35 trillion of windfall (paper) wealth.

It amounts to an egregious variation of the old “trickle-down” theory.

And it’s all sponsored and endorsed by a duopoly with deep and abiding interests in American Empire…

Uncompromising Common Sense

Bubblevision – which now includes the opinion page of The Wall Street Journal – begged the Fed to stop “normalization” now.

It’s clear now that only Wall Street matters – inside the Acela Corridor it is the economy.

Powell didn’t exactly cave; the Fed made its move, but it did “soften” somewhat its language about the global economy.

That’s gotta be a “good news/bad news” thing: Yeah, sure, money is easier, but it’s because the economy ain’t so good…

Markets are corrupted by monetary central planning. They’re confused. And the road back to “normal” is going to be treacherous.

We’re looking at a major re-pricing for all financial assets. And thousand-point intraday or day-to-day swings are part of that equation. Those can be frightening… for “buy and hold” investors.

I have a different approach, one that combines strategy and tactics into a plan flexible enough for you to survive and thrive amid the coming chaos. It’s called “The Stockman Model.”

All we’re after is a little stability, perhaps a chance to pocket a windfall when opportunity presents…


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David Stockman

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David Stockman

David Stockman is the ultimate Washington insider turned iconoclast. He began his career in Washington as a young man and quickly rose through the ranks of the Republican Party to become the Director of the Office of Management and Budget under President Ronald Reagan. After leaving the White House, Stockman had a 20-year career on Wall Street.MORE FROM AUTHOR