My new podcast episode is out

My new podcast episode is out.

My new podcast is out.

Central banks are becoming huge drivers of deflation. Fed adds to this today.

The Fed held interest rates steady today. It was the wrong decision. 

Central banks are increasingly becoming big drivers of deflation. Look at the ECB last week and its announcement that it was now going to buy high yield bonds. That was the day the markets topped out. Stocks and many materials markets turned south and have been heading down since.

The ECB has been driving massive deflation in Europe via its negative interest rate policy and ongoing asset purchases. Now it's buying high yield. That's HIGH YIELD income that would have gone into the economy. And Draghi wonders why deflation has been so hard to counter? For chrissakes, he's the one driving it.

Now we have the Fed and Yellen and her extreme cautiousness. The Yellen Fed is probably the most cautious Fed that I have ever seen. She did one rate hike back in December. That's it. Even so that was a success. It got things going. In fact if you go back and look at what happened after that December 16 hike you will see that gold bottomed and commodity markets all started moving higher. Stocks climbed, etc. Growth started to pick up. 

We've been lucky because so far this fiscal year government spending has been strong. It's up bout $90 billion over last year and last year was the strongest spending in five years. It's been the only thing that has kept us out of recession, but not by much. We're only growing at 0.8%. That's not enough..

We've been lucky with this government spending. However, we continue to face extremely strong headwinds most of those being injected by central banks and their insane deflationary policies. It's like a diseased academic dogma that's taken hold of policy and it's literally killing the global economy. Negative rates, income removal and the belief that all of that is stimulative? Utterly insane.

I have been correctly bullish since last year on the economy, stocks and risk assets. I have not been calling recession for the past three years like others because of the deficit. By the way, the deficit is now $93 billion higher than last year. Where are those people who have been screaming that the deficit is too small? Maybe it is, but at least acknowledge the fact that it's growing again. They don't. Why? Because they don't even know. They're too lazy to even look.

What we're facing now is probably a stall. I'm hoping that's the worst case. Maybe we continue to grow real, real, slow as spending continues to rise, but no acceleration. Not with the central banks fighting this recovery with everything they've got.

Let me finish by talking about gold. I've been bullish on gold since last December. That's when the Fed raised rates for the first time in 9 years. I wrote in this blog, BUY GOLD and gold's been going virtually straight up since that call. 

Last week it was all over the news that George Soros was buying gold and selling stocks. I laughed. Here's a guy who, recently at least, has been talking lots of nonsense. About China credit bubbles and global "uncertainty," and more. Based on this "rationale" it's an amateur move, buying gold. "Uncertainty" is not a reason to buy gold.

With deflation ratcheting up this could be 2014 all over again for gold. In other words, the beginning of a big decline. George better watch out. 

Had the Fed raised rates today I would have been bullish as hell, but that didn't happen and not only didn't it happen, but what came out of that meeting at least for me was a timid and confused Fed. Yellen's frightened and confused as hell. This is probably what a Hillary Rodham Clinton presidency will look like. Immense caution when it comes to the things we really need and bold, irresponsible action on the things we don't need. Like wars.

Great.

Anyway, I'm not saying dump stocks. Not just yet. The spending could pull us through. Barely. But right now it's all we got.

I like Trump, but he's really misinformed on a lot of his economics. (And, no, not the trade stuff.)

I like Trump. I like his lack of political correctness. I like his foreign policy: end senseless wars, do away with NATO, normalize relations with Russia, etc

I like his proposal to rebuild the infrastructure of the USA, replace Obamacare with affordable, universal health care.

I even like his policy on trade: force the foreign sector to run deficits by imposing tariffs on them, while at the same time, ramping up domestic output and employment.

All good.

However, on some other economic things he's really misinformed.

Look at these comments...

“I think there are times for us to refinance debt with longer term, we owe so much money,” Trump said.

“I am the king of debt, I love playing with it, but now we’re talking about something very, very fragile,” he said.

“If we raise interest rates and if the dollar starts getting too strong, we’ll have some very major problems.”

“I have nothing against Janet Yellen whatsoever, she’s very capable person. But she’s not a Republican,” Trump said. “When her time is up I would most likely replace because of the fact it would be appropriate.

“I love the concept of a strong dollar, but when you look at the havoc that a strong dollar causes ... it sounds better to have a strong dollar than it actually is.”

So he thinks we borrow from someone and we have to "lock in" low rates, long term, to "save."

He thinks high rates makes the dollar strong. It's in fact the opposite.

He thinks it's better to have a weak currency. It's the opposite, at least if a nation desires a high standard of living.

He wants to politicize the Fed by putting a Republican even though he admits that Janet Yellen is capable and he likes her policies. He says, "It's just that, it wouldn't be appropriate."

As you can see, he's got some work to do. Especially on the refinancing the debt stuff. Hey, maybe he can just ask his new Republican Fed Chairman to set rates at zero all along the curve. There ya go!

Fed limits its own lending powers. Why the hell bother having a central bank at this point? Bunch of fools.

I guess Janet Yellen got totally spooked a couple of weeks ago. Remember that House bill designed to limit the Fed's lending powers? The Fed Oversight Modernization and Reform Act? Yellen went nuts, saying it would completely politicize the Fed and cause it to be ineffective in crises.

So what does she do? The Fed is now adopting a set of new rules designed to limit its own power to lend. LIMIT ITS OWN POWER TO LEND!!!

From now on, it can only lend if at least five institutions need help. And it lends at a penalty rate, always.

This is nothing less than imposing discipline on the liability side of the balance sheet, which is ridiculous. The whole structure of banking is based on public subsidy of the liability side. (Deposit insurance.) Why put a timebomb there? To destroy taxpayer equity? What about effectively regulating what the banks are doing on the asset side? Hmm? Did that ever occur to them? For chrissakes the banks are into everything BUT plain, ordinary lending. They're trading CDO's and credit default swaps and commodity futures and currencies and all kinds of crap.

WTF is wrong wtih these people? Sorry to all the ladies reading this, but Janet Yellen--a woman--should not be Fed Chair. Wishy washy. Always looking for consensus. Not wanting to rock the boat. (Contrast with an Alpha Male like Volker, who,  maybe I didn't agree 100% with his policies, but no one pushed the guy around.)

And Yellen is a snapshot of what a female presidency will look like so get ready.

The whole system is a joke. From idiots at the Fed to the morons in Congress to the neocon lunatics infesting the Obama Administration and DOD.

You might as well laugh. We're all doomed.

Jim Grant...the guy who's been wrong almost as much as Peter Schiff (but more clownish) makes a Fed prediction. So do the opposite!

Jim Grant is like a funny cartoon character. Like Big Bird. Tall. Lanky. Goofy bow ties (like Jim Rogers). A doofus. He's even funnier looking than Schiff, but just as wrong--on interest rates, inflation, QE, the dollar, gold, the economy...you name it.

He says things like this:

"Central banks the world over have been suppressing [rates], manipulating them, and otherwise manhandling them," Grant argued, predicting "this experiment will end in failure" because price controls never work."

"Suppressing rates?"

"Manhandling rates?"

What's with the reference to masculinity (manhandling)? He seems to be terrified by it. It's some kind of violation (rape?) in his mind. It's a womanish statement.

And price controls never work? They work for monopolists, Jimbo. All the time. Just ask John D. Rockefeller.

Anyway he's saying the Fed will never get rid of the word "patient" when it comes to describing their position on accomodation.

With Grant saying that, I'll take that bet. I bet they remove it at today's meeting and in their statement. I'll buy the dollar and sell stocks for a trade. For today. Just to bet against Jim Grant.

Unfortunate to see Bernie Sanders get off track like this. Kelton needs to keep him on message.

Bernie Sanders (I-VT) is a great voice for progressive causes and he's definitely got a gift for language and communication. That's why it's unfortunate to see him get off track like this and lecture Janet Yellen and the Fed about reminding the ECB of its responsibility to Greece and its economy.

Americans don't care. And it can be wrongly construed that he is advocating another American taxpayer bailout of some two-bit country or foreign institution. (As it has been by Zerohedge and other blogs.)

Here's some of what Sanders said:

"In 2008, during the world financial crisis, did you know the Fed, in short term loans, made trillions of dollars available to the ECB -- the European Central Bank. The Fed could have said hey guys you're on your own, but the Fed correctly did not. It understood the significance of what a worldwide financial collapse would be about." Read more.

He may have been referring to the Fed's swap lines and if so, those "loans" did not preclude a financial collapse. Rather, all it did was keep the foreign exchange value of the dollar below where it would have been if the ECB sold euros for dollars to meet the dollar needs of its banking system. At the time I spoke out about that loudly here, here, here, here and here. (And more!)

Bernie, stick to America and our own needs and problems. Kelton should be keeping him on track and not letting him make these types of comments.

The Fed spends $100 million on research...

That's more than double what I spend, too!