Category Archives: Federal Reserve Chairman

Central Banks Hoard Gold, Shed U.S. Treasuries

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A lot has been made by gold-money bugs about the roles that central banks have played in the run-up in the gold price that accounts for a 38% increase in the yellow metal’s price this year alone.  Some of these analysts attribute the shedding of central bank holdings of U.S. treasuries and other agencies’ bonds to purchase gold, which has accelerated gold’s recent meteoric rise. 

It is not just those in the gold community that hold this belief, but some in the mainstream financial press cite reports and data that purportedly show that central banks now own more gold than U.S. bonds.  If true, such a shift would be a fundamental change in the world’s financial markets and could mean the end of the post-Bretton Woods monetary order, where the dollar acted as the reserve currency, replaced, ironically, by gold which the dollar replaced in 1971.

A recent Financial Times (FT) article, written by Toby Nangle and titled “Do Central Banks Really Have More Gold Than U.S. Treasury Bonds?,” attempts to shed light on these claims.* It should be a reminder, as the article admits, that it is difficult to get accurate figures from data provided by central banks and international agencies. 

Since the global financial crisis of 2007-2009, central banks’ holdings of gold have steadily risen.  The International Monetary Fund (IMF), which keeps data on central banks’ financial sheets, estimates that banks are holding between 22% to 28% of their assets in gold, which comes to $3.86 trillion of gold as of the end of June. 

The FT article contends that this percentage of reserves is “mostly about recent price action rather than a fundamental and dramatic shift out of treasuries and into the yellow metal.”

While central banks still hold the bulk of their reserves in U.S. treasuries, the gap is narrowing as the price of gold continues to reach new highs which FT admits, but downplays: “the underlying reality isn’t quite as dramatic as it might seem….”

What should be taken from the article, not only by investors, but just about everyone else, is that a mainstream financial organ like FT is noticing not only the rise in gold, but the potential of the greenback losing its reserve status – an event that would have immense and catastrophic consequences for all Americans.  Such talk, up to this point, was only heard from hard-money advocates.

The rising price of gold is signaling that greater price inflation is on the horizon with continuing deterioration of the dollar’s purchasing power along with more job losses, which is the dreaded specter of “stagflation.”

Another of America’s financial elite has sounded the alarm that something ominous is on the horizon.  Morgan Stanley has revised its traditional 60/40 portfolio split, the 40% typically allocated to bonds, to a 60/20/20 portfolio with 20% allocated to gold.  To readjust its portfolio to increase its gold holdings, Morgan Stanley will have to reduce its share of U.S. treasuries, which will put more downward pressure on bond prices and increase yields.

With growing concern over the safety of U.S. treasuries, the continuing rise in prices, and the all-time high in gold and asset prices, the Federal Reserve, at its September meeting, decided to cut the federal funds rate by 25 basis points while indicating that there will be more cuts coming.  The much-anticipated rate cut, of course, was in reaction to the unprecedented pressure brought to bear by President Donald Trump on Fed Chairman, Jerome Powell.

Like his reckless tariff policy, which has driven some allies into the arms of America’s supposed adversaries – see India and its rapprochement with China – Trump’s Fed bashing will have the opposite of its intended effect. 

Trump believes that rate cuts will make the economy “take-off” and he hopes that lower borrowing costs will make service of the gargantuan U.S. debt more manageable. 

As usual, the president talks out of both sides of his mouth.  He has spent most of his second term boasting that the economy is the best it has ever been.  Why then is there a need for interest rate cuts if the economy is booming? 

Trump also promised massive spending cuts via the Department of Government Efficiency but, instead, he passed the “Big Beautiful Bill,” which added more spending, requiring more borrowing.

America is not alone in cutting rates as central banks across the world (whose economies are also debt ridden) are reducing rates which will only encourage more borrowing.  This, of course, will lead to more price inflation as central banks will have to print more money to finance the profligate spending of their governments. 

Eventually there will be a return to gold in the monetary order, not just as a reserve asset, but one used in exchange as fiat currencies collapse. 

If economic trends continue, that day may not be far off.   

*https://www.ft.com/content/0dbc435d-7d7e-43d7-b730-b8ced4b1cba2

Antonius Aquinas@antoniusaquinas

https://antoniusaquinas.com

Trump’s “Big Beautiful Bill” and the Ultimate Demise of the Dollar

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Despite considerable arm-twisting, President Donald Trump’s laughably misnamed “Big Beautiful Bill” (actually a Big Ugly Atrocity) barely passed both houses of Congress.  Such a monstrosity, which has been conservatively estimated to add $5 trillion to the national debt including interest over the next decade, is a slap in the face to those souls who believed Trump’s campaign rhetoric of cutting federal spending.*  This vindicates, once again, those who have correctly seen Trump for what he truly is – a big-spending liberal New York democrat.

Arguably, the most reprehensible aspect of the legislation is the $150 billion increase in “defense” outlays which will boost Uncle Sam’s military budget to a neat $1 trillion a year.  This will provide plenty of lucre to keep the military industrial complex well-oiled to continue its world-wide mass slaughter of innocents.  So much for lightweight Secretary of Defense Pete Hegseth’s initial, and now long forgotten, talk of cutting the Department’s budget by 8% per year over the next decade.

While Trump and nearly every Congressional Republican continue to spend the nation into oblivion, little attention was given to the continuing and financially ominous decline in the U.S. dollar.  The greenback has fallen more than 7% in 2025, the worst since 1973, with some analysts predicting another 10% drop by the end of the year.**

Concomitantly, the dollar’s decline has seen a historic rise in the gold price with silver reaching highs not attained since 2012.  Precious metals are signaling economic troubles ahead, especially in the currency markets.

While some have pointed to Trump’s harmful tariff policy for the dollar’s fall, the real culprit is the massive U.S. debt and interest payments, which increased even further with the passage of the Big Beautiful Bill Act.  To finance the exploding debt and interest (which has now surpassed $1 trillion per year), the government will have to borrow even more. 

This will force the Federal Reserve to print more money to service the debt putting added downward pressure on the greenback.  More dollars printed will obviously mean a fall in its purchasing power, not only domestically but in relative terms to foreign currencies.  The inverse of a decrease in the purchasing power of the dollar will be an increase in the prices of goods. 

It is a vicious circle exacerbated by Trump’s latest budget.

A larger question that U.S. policy makers will have to face if the dollar continues to slide is its current status as the world’s reserve currency.  The loss of this privileged position would be the death knell to the ability of the United States to project its financial and military power throughout the world. 

Most international transactions are settled in dollars that bolsters its demand in foreign exchange markets.  If countries settle trade in another currency or, as some have speculated, in terms of precious metals, the demand for dollars would fall.  If the supply of dollars has to increase due to continued profligate U.S. federal spending and demand for dollars internationally falls, the “price” of dollars (their purchasing power) would tank. 

Moreover, if foreign nations do not need dollars in trade, eventually the dollars they hold will make their way back to America, causing domestic prices to sharply escalate. 

Of course, the one bright spot of losing its world’s reserve currency status would mean the collapse, or at least a catastrophic pull back, in America’s vast overseas military commitments and interventions.  No longer could the U.S. maintain its mammoth military expenditures to police the world.

Massive deficits are also an impediment (although Trump apparently does not realize it) to the president’s hopes of lowering interest rates.  Even if he can get Federal Reserve Chairman Jerome Powell to cut rates, the Fed does not control long-term rates which will undoubtedly spike putting upward pressure on all rates.  This will increase borrowing costs for the government, which will likely end in a sovereign debt crisis.

At this point, there is no turning back.  The only way to save the dollar is to cut spending, which would mean less borrowing and thus less money printing. 

Trump and the Republicans with their Big Beautiful Bill have hasten the dollar’s ultimate demise and the economic collapse and social misery that will follow. 

*Committee for a Responsible Federal Budget, “Breaking Down the One Big Beautiful Bill.”  4 June 2025, ww.crfb.org/blogs/breaking-down-one-big-beautiful-bill 

**Liz Hoffman, “The US dollar is on track for its worst year in modern history.”  Semafor, 3 July 2025, https://www.semafor.com/article/07/03/2025/the-us-dollar-is-on-track-for-its-worst-year-in-modern-history

Antonius Aquinas@AntoniusAquinas

The Trump – Powell Spat: A Distraction from the Debt Crisis

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Since his return to office in January, President Donald Trump has called on Federal Reserve Chairman Jay Powell to cut interest rates which Powell and the Fed’s Board of Governors have refused to do.  In typical child-like behavior when he doesn’t get his way, Trump has hurled insults at Powell calling him a “stupid person,” “too late Powell,” and a “numbskull.” 

Trump’s juvenile attacks, although misplaced, have been quite humorous and a welcome change in tone to the respect, reverence, and almost deification that previous Presidents, Congressmen, and the financial press heap on Federal Reserve Chairmen.

Unfortunately, as with all his policies, Trump’s megalomania is on display.  After the Fed’s June meeting when it once again decided to leave rates unchanged and indicated that there might be only one rate cut in 2025, Trump again slammed Powell and suggested that “Maybe I should go to the Fed.  Am I allowed to appoint myself to the Fed.?” *

While Trump’s ridiculing the head of one of the sacred cows of America’s ruling establishment is welcomed, his crazed notion of putting himself, and presumably future presidents, in charge of monetary policy does not offer any viable alternative to the debt crisis that is staring the nation in the face with the U.S. in the hole in excess of now some $37 trillion. 

Although Trump’s blasting of Powell has provided some comic relief from the dire economic conditions which confront the U.S., in reality both the president and the Fed Chair are wrong over interest rate policy although, in this case, Powell is less wrong.  Like most of Trump’s kooky ideas – taking over Greenland, making Canada the 51st state – not only is the slashing of interest rates counterproductive, but the idea of giving the executive branch of government control of monetary policy would turn the nation into a complete dictatorship.

Powell, too, has been mistaken in his policy of holding rates steady. Interest rates, in fact, are too low and need to be higher.  At current levels, rates are too “accommodative” as price inflation remains above the Fed’s 2% target.  Of course, in reality prices are rising at a much briskier pace than official government estimates. 

Hiking rates would encourage savings and discourage consumption both of which would put downward pressure on consumer prices.  If Trump wants to achieve his goal of a reindustrialized America, there needs to be an increase in savings. Production of goods takes place over time and without savings to fund the construction of factories, the purchase of machines and equipment, and the payment of wages, there can be no economic growth.

Trump wrongly believes that lower rates will spur economic growth.  Sustained prosperity can only take place through savings and investment not money creation via credit expansion which the president is a fan of.    

More fundamentally, both Trump and Powell are wrong: interest rates should not be set by governments or monetary authorities, but be determined by market forces – the aggregate decision making of individuals on how much to save or how much to consume their income.  Concomitant with non-state involvement with the setting of interest rates, a return to a metallic monetary standard would prevent price inflation which would make saving more attractive.

Another reason why Trump wants lower rates is that servicing the mammoth U.S. debt would be somewhat more palatable. His “big, beautiful bill,” working its way through the Senate, will need to be financed.  Lower rates would reduce the government’s borrowing costs.  This irresponsible argument was also made by former Federal Reserve Chair and later Treasury Secretary Janet Yellen.   

Since Donald Trump has no ideological core that shapes his world vision, his outlook and policies are more often than not based on what affects him personally or who strokes his ego or lines his pockets.  The proper monetary policy for the nation is not to cut interest rates, but to raise them and reduce the national debt through spending cuts.  While there would certainly be short-term pain from such a policy, eventually matters would turn around and economic activity would be placed on a sound footing.

Ultimately, if sound money is ever to return to America and the Western world, its control must be taken away from central banks and the influence of mercurial politicians.  The creation of money, its distribution, authenticity, and safe keeping should be left up to a decentralized non-governmental arrangement. 

*Tyler Durden, “Trump Slams ‘Stupid’ Powell: ‘I Think He Hates Me.  I Call Him Every Name in the Book to Try and Get Him to Cut,’” Zero Hedge, 18 June 2025. https://www.zerohedge.com/markets/trump-slams-stupid-powell-i-think-he-hates-me-i-call-him-every-name-book-try-and-get-him

Antonius Aquinas@AntoniusAquinas

Treasury Secretary Janet Yellen Apologizes for Out-of-Control Debt

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Outgoing Treasury Secretary Janet Yellen has apologized (sort of) for the Biden administration’s failure to reign in the U.S. financial house and presiding over an increase in trillions of dollars in debt for the nation. According to Tyler Durden, writing for Zero Hedge, Yellen said at a Wall Street Journal organized event in December:

I am concerned about fiscal sustainability and I am sorry that we haven’t made progress . . . . [T]he deficit needs to be brought down especially now that we’re in an environment of higher interest rates.*

A little too late – don’t you think, Janet? 

Yellen was Federal Reserve chairman from February 2014 to February 2018 and, before that, served as vice chairman under Ben Bernanke.  She was replaced by President Donald Trump with Jerome Powell. 

Yellen, as do all Fed officials, reiterated the point that the central bank remains “independent” to pursue its mandate of full employment and price stability.

This is nonsense like most of what she has said over the course of her long and disastrous career.  Instead of independence, her move from Fed chair to Treasury secretary is a striking demonstration of just how political the Fed and the nation’s entire monetary and financial system truly is. 

Nevertheless, she continued to espouse the hypocrisy:

I see from my own experience is that countries perform better – they have not only inflation performance – but real performance in terms of job creation and growth is also stronger when a central bank is left to use its best judgement without political influence.

Under Yellen as Fed chair (the direct subordinate to Ben Bernanke), and as Treasury secretary, it has been estimated that the U.S. debt skyrocketed to the unfathomable amount of $15 trillion.  Yet, it is only when she is about to depart her post that Yellen is lamenting the Biden administration’s efforts to reign in the debt. In fact, there were none.

Besides the debt, the interest on it under Yellen’s watch stands at $1.2 trillion yearly, which is now the second-largest federal expenditure only topped by Social Security.  In her mea culpa, Yellen ignored this ticking timebomb.

One of the non-sensical reasons that Yellen often gave to justify massive U.S. borrowing was that interest rates over the past decade had been historically low.  She argued that the federal government should take advantage – and did – of the low-interest rate environment. 

Economic nincompoops like Yellen apparently didn’t understand that interest rates were low because the Fed was artificially suppressing them through currency debasement.

Recklessly borrowing for this reason would be similar to a drunk refusing to sober up because liquor prices had fallen to all-time lows.  Yet, this is what a secretary of the U.S. Treasury espouses for monetary policy.  Worse, few in the financial press or Congress, where Fed officials routinely testify, are ever questioned about such a dangerous idea. 

Most sensible people, if given the chance, would ask: “What would happen to the debt and interest on the debt if rates would go up?”  The United States may soon see this unpleasant reality come to fruition. 

Sadly, Yellen’s replacement, Scott Bessent, who was a business associate of George Soros, is an “easy money” advocate, as is Trump, who continually badgered Fed Chairman Powell during his first term for not cutting interest rates. 

It will be interesting to see what actions the new Treasury secretary will take if the long-anticipated debt crisis arrives.  More likely than not, the second Trump administration will follow the monetary policies of the disgraced Janet Yellen. 

*Tyler Durden, “Janet Yellen ‘Sorry After Presiding Over $15 Trillion Increase in US Debt.”  13 December 2024 https://www.zerohedge.com/markets/janet-yellen-sorry-after-presiding-over-15-trillion-increase-us-debt

Antonius Aquinas@antoniusaquinas

https://antoniusaquinas.com

Many Americans Say They Will Never Retire

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A recent AARP poll provides further evidence of the deterioration of American living standards, especially for those approaching retirement age.  The study contradicts what most policy makers have believed to be a “soft landing” for the economy after two years of rampant inflation.

“More than one quarter of U.S. adults over the age of 59,” the survey found, “say they expect to never retire.”  One in four have no retirement savings while one third of “older adults” have credit card debt of more than $10,000 and 12% hold a balance of $20,000 or more.” The Headline of an April 25 Washington Times article by Fatima Hussein says it all: “More Than 25% of U.S. Adults Over 50 Expect Never to Retire.”*

Not surprisingly, the report conducted with the NORC Center for Public Affairs Research, points out that the lack of savings is due to the rising cost of living: “Everyday expenses and housing costs, including rent and mortgage payments, are the biggest reasons why people are unable to save for retirement.”

While AARP zeroed in on rising prices as the culprit for the financial pinch that potential retirees are feeling, it did not delve into who or what was the catalyst for the increase in living costs.  Neither has the financial press, which has always been a cheerleader for the Uniparty, been diligent in its duty about the ultimate source for soaring prices. 

While the trend of Americans working well into their retirement years has been going on for years, the situation has accelerated under both the Trump and Biden presidencies.  In concert with the Federal Reserve, the fiscal policies of the two administrations have been the primary factor for why many Americans cannot retire. 

Even before the start of the hyped Covid pandemic, the Trump administration, in just one term, was on pace to become the biggest spender in U.S. history.  The astronomical increase in government spending and money printing which took place in response to Covid are now being felt.

The Fed’s balance sheet before the Covid lockdowns in January of 2020 stood at $4.15 trillion. By the end of Trump’s presidency, it had nearly doubled to $7.3 trillion as the government doled out “stimulus checks” to non-working Americans and transferred billions to business favorites and cronies in an unimaginable grab of power and wealth. 

Under Biden, the balance sheet had risen to a little short of $9 trillion in mid-2022 and has come down, now standing at $7.4 trillion, according to American Action Forum.**  

Expanding the balance sheet means that the Fed issues more dollars it takes and buys assets (mostly government bonds). This is actually debt monetization.  The increase in the money supply is the classic – and true – definition of inflation.  Rising prices are not inflation, but its consequence.   

At first, the new money went into financial assets increasing their nominal values. However, because of the “lag effect,” the inflation the Fed created is now pushing up consumer prices.  The Fed has had to do this because of profligate government spending which must be sustained through borrowing, since tax revenues are not enough to meet expenditures. 

When asked in his current re-election campaign on what he would do to solve the rising cost of living, Trump said that he would “drill baby drill.”  Such a statement demonstrates again that the former president, like the current occupant of the office, does not understand the problem.

Increasing domestic oil production is certainly good in itself, which will create jobs and bring more oil to the market. But it will not address general price inflation which is a monetary phenomenon. 

Rising prices can be reversed if the Fed increases interest rates, or better yet, lets rates be set by the market.  Higher rates will entice people to save, which will take money out of circulation, thus putting downward pressure on prices.

Just as important, the government needs to cut spending and eliminate departments and programs which will mean less money printing by the Fed.  The likelihood of this taking place in a presidential election year is next to zero.      

Even if the government and the Fed took the proper steps and began to put the nation on a sound financial footing, it will take years for the damage that has been done to be rectified.

Sadly, the Uniparty has no intention of doing the right thing and as economic conditions worsen, the number of people who must work until they drop will continue to rise.

*Fatima Hussein, “More than 25% of U.S. adults over 50 expect never to retire.” The Washington Times, 25 April 2024, A7. **https://www.americanactionforum.org/insight/tracker-the-federal-reserves-balance-sheet/

What the Rising Gold Price Signals

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The recent run-up in the gold price has not garnered the attention among the mainstream financial media outlets as it should.  Gold has, in part, been overshadowed by the rise in the price of bitcoin and other cryptocurrencies. 

Naturally, the financial press, which is really an arm of the government and its central bank, wants to ignore, as much as possible, references to gold as protection against the continuing increase in the price level which itself has been deliberately understated by monetary officials.  The media and government understand that precious metals are the ultimate security against runaway inflation and economic collapse.

While the increase in the gold price has reached nominal highs, it and the price of silver have not passed their all-time 1980 highs in real terms.  Adjusted for inflation, gold would have to rise to about $3590 an ounce while silver would have to surpass $50 an ounce.  Both are poised to exceed these watermarks in the not-too-distant future.

Precious metals will continue to escalate unless the Federal Reserve radically changes its interest rate policy to combat inflation as former Fed Chairman Paul Volcker once did.  Volcker raised interest rates to double-digit levels which caused gold prices to fall.  While Volcker could get away with such actions (because, at the time, the U.S. was still a creditor nation), current Chair Jerome Powell cannot because of the enormity of public and private debt.  Double-digit interest rates would collapse the economy and plunge millions of Americans into bankruptcy.

The rising price of gold is anticipating some of the promised policy actions of the Fed.  Since the end of last year, the central bank has indicated that it would be cutting interest rates.  In addition, Powell is considering ending the Fed’s “Quantitative Tightening” (QT) program.  Both are highly inflationary. 

While commentators have focused on gold’s spectacular price rise, there is an underlying issue that is also taking place.  The record setting gold price is signaling that the present fiat monetary order, which is based on the dollar as the world’s reserve currency, is coming to a financially unpleasant end. 

Ever since 1971, when the Nixon Administration closed the “gold window,” refusing to redeem gold for dollars held by foreign central banks, the world has been on a “dollar standard” where bank reserves are held in Greenbacks.  If the Fed continues to print dollars to sustain government spending at this rate, the dollar will continue to lose purchasing power and foreigners will no longer want to hold them.  Foreign central banks will then turn to gold.  In fact, central banks are already increasing their positions in gold which has been a catalyst that has fueled the latest rally.

Not surprisingly, the Fed has not purchased much gold (or is not admitting publicly that it has) since it would be a bad look for the issuer of the world’s reserve currency to be abandoning its own currency for gold.

Besides the severe financial implications if the dollar is dethroned, there will be dramatic geopolitical repercussions from the loss of its hegemony.  Just like the British pound was replaced as the dominant world currency after England insanely exhausted itself in fighting WWII and ending its empire, America will face a similar future when the dollar becomes just another money.  Many will see it as a “blessing” if and when the U.S. Empire comes to an end.

While it would appear logical and morally sound to replace the present crumbling monetary order with one based on gold and silver, a far worse paradigm than even the present one is, no doubt, being planned.  The new system will be one of central bank digital currency (CBDC) which would give governments and bankers the power to monitor and control all aspects of economic and social life. 

Some states have passed legislation to counter CBDC, such as Florida in 2023 under Governor Ron DeSantis who said: “The Biden administration’s efforts to inject a Centralized Bank Digital Currency is about surveillance and control.  Today’s announcement will protect Florida consumers and businesses from the reckless adoption of a ‘centralized digital dollar’ which will stifle and promote government-sanctioned surveillance. . . .”*

While the press and policy makers have ignored the surge in precious metal prices, it should be a warning to everyone that difficult economic times are still yet to come with the potential of a new draconian monetary order to be installed on the horizon.  Observant individuals should heed gold’s signals and take appropriate measures to safeguard their futures.

*https://www.flgov.com/2023/03/20/governor-ron-desantis-announces-legislation-to-protect-floridians-from-a-federally-controlled-central-bank-digital-currency-and-surveillance-state/

Antonius Aquinas@AntoniusAquinas

https://antoniusaquinas.com

Trump’s Inflation

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Former President Donald Trump attends a rally in support of Arizona GOP candidates, Prescott, Ariz., on July 22, 2022. (Mario Tama/Getty Images)

Once again, former president Donald Trump criticized the Biden Administration for the record consumer price increases that Americans are now paying.  His remarks followed up on his July 4th speech in Wyoming where he lamented about the state of the nation: “I know it’s not looking good for our Country right now, with a major War raging out of control in Europe, the Highest Inflation in memory, the worst 6 month Stock Market in History, the highest energy prices ever.”* 

In his most recent campaign rally for GOP hopeful Kari Lake, Trump lambasted President Biden for creating the “worst inflation in 47 years”** and for his “war on American energy” which Trump believes has contributed to the record hike in fuel prices.

The former president boasted that had he been re-elected “none of these terrible events would have happened.”  He reassured his audience “not to worry” and that “we will make America great again.” 

As with all of his post-presidential rallies, Trump’s criticism of the Biden regime comes with touting his own accomplishments as chief executive.  Most of these claims are so outrageous they damage or totally negate his critique of Biden’s policies and make Trump sound like a fool.

Take, for instance, his rally in Arizona for Kari Lake, where he had the audacity to say that under his watch the country “had the greatest economy in the history of the world with no inflation.” [!]  Such nonsense needs no comment.

Like his boasts about the economy, the former president deftly left out his Administration’s role in the drastic rise in prices which Americans are currently suffering from. 

First, however, the meaning of “inflation” should be explained.

Inflation, properly defined, as it was understood until the present era, meant an expansion of the money supply.  “Deflation,” its opposite is a decrease in the money supply.  The rise or fall in prices – usually a rise in producer and consumer prices – is a consequence of the expansion or contraction of the money supply.  Once understood, the rampant rise in prices in America and throughout the world has been the result of the increase in the money supply not only by the Federal Reserve, but all central banks.

Another important tenet of monetary theory long since forgotten has been the notion of a “lagging indicator.”  Between the expansion of the money supply – inflation – and the resultant increase in prices, there is often a lag which could take months or years to appear. 

The increase in consumer and producer prices is due to the dramatic explosion of money and credit which took place during the Trump Administration not only in response to the scamdemic, but in the years leading up to it.  In fact, the plandemic was a convenient excuse to inject massive liquidity into a system that began to hemorrhage in September, 2019.  In the early months of 2020, the markets began to implode before the unnecessary lockdowns as the air began to come out of the financial bubble.  This has been ignored by the financial press and Trump himself.

Prior to the covid hysteria, Trump had repeatedly lobbied for “cheap” money, calling for a renewal of quantitative easing, reduction in interest rates, and he even spoke about “negative” rates.  The former president threatened to fire Jerome Powell, whom he had picked to head the Federal Reserve, for not reducing interest rates far enough.  Trump complained that President Obama benefited from the Fed’s accommodative monetary policy and wanted similar treatment so as to keep the financial bubble going.

Trump’s fiscal policy was also highly inflationary as he ran record deficits long before covid.  His tax cuts and failure to cut government spending led to greater government borrowing which the Fed was forced to monetize.  Trump was on pace, well before the 2020 lockdowns, to spend more money in four years than Obama spent in his two terms.  By 2019, the deficit had grown to $1 trillion dollars, up $205 billion, 26 percent from 2018.***  Again, all before covid had begun.   

It was the Trump Administration’s wrongheaded response to the corona virus which is largely responsible for the rising prices of today.  If the lockdowns were necessary (which a growing number of officials now admit they were not), the proper policy would have been to reduce the money supply (and government spending in general) since the lockdowns reduced production meaning less goods and employment.  The massive increase in the Fed’s balance sheet from $4 trillion to some $9 trillion meant more money “chasing fewer goods” causing the prices of the available goods to increase – some dramatically.

What was needed was a reduction in consumer spending since there was less goods being produced with the lockdowns.  Less demand would have offset the reduction in supply and would have kept prices from spiraling.

Instead, Trump – as did his successor – following the doctrines of Lord Keynes, attempted to maintain aggregate demand at pre-covid levels and sent out stimulus checks even to those still employed.  While the money given out to American workers pales in comparison to the massive transfer of wealth to politically-favorite corporations, big business, and the expansion of the government itself, the propping up of aggregate demand led to supply chain shortages.   

Trump is not alone in his ignorance of economics.  His handlers, economic advisors, and the vast majority of his loyal supporters do not understand what took place under his administration.  The current financial mess can be laid at his – and the Federal Reserve’s – feet.  To be fair, his predecessor, Barrack Obama, is also liable.    

The “inflation,” and now recession, which the country is suffering through cannot be fully attributed to the Biden Administration although it too has added to the crisis with more profligate spending. 

The remedy for the current mess is not the re-election of a very flawed former president who does not understand the problem at hand and throughout his term was constantly outfoxed by the Swap which he was elected to drain.  The solution is a return to sound money, the abolition of central banking, and the allowance for the necessary cleansing of the financial bubble. Until a presidential contender speaks in these terms, America’s financial woes will continue.

*https://www.zerohedge.com/political/heres-what-trump-says-inflation-would-be-if-he-were-still-president

**https://www.zerohedge.com/political/trump-blasts-biden-over-soaring-prices-says-true-inflation-rate-much-much-higher-91

***https://www.washingtonpost.com/business/2019/10/25/us-deficit-hit-billion-marking-nearly-percent-increase-during-trump-era/

Antonius Aquinas@AntoniusAquinas

https://antoniusaquinas.com

“Inflation,” Properly Defined

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What Is Inflation in Economics? Definition, Causes ...

The use or rather misuse of language has always been an effective tool of politicians to enact their agendas.  George Orwell’s “Politics and the English Language” brilliantly showed, in his day, how language was being manipulated for all sorts of totalitarian measures:

Political language — and with variations this is true of all  political parties, from Conservatives to Anarchists — is designed to make lies sound truthful
and murder respectable, and to give an appearance of solidity to pure wind. One cannot change this all in a moment, but one can at least change one’s own habits, and from time to time one can even, if one jeers loudly enough, send some worn-out and useless phrase — some jackboot, Achilles’ heel, hotbed, melting pot, acid test, veritable inferno, or other lump of verbal refuse — into the dustbin, where it belongs.*

Since its publication in 1946, matters have only gotten worse.  For example, in today’s parlance words such as “racism,” “discrimination,” “fascism” have lost all meaning and are usually used by the Left to smear its political opponents.

In the sphere of economics, examples abound of the misuse of terms and concepts all of which advance the interests of the politically-connected elites, technocrats, governments, and the banking establishment at the expense of everyone else.  One of the most glaring examples which, after the financial collapse in 2020, has now become more prominent in daily life, has been the meaning of the word “inflation.” 

Inflation, at one time, and properly understood meant an increase in the money supply; it did not mean an increase in prices.  A rise in prices was and still is, the result of inflation.

The meaning of inflation, however, has been deftly misused by the world’s monetary lords to cover their own nefarious machinations.  By deliberately changing the term it deflects the focus of their activities which can thus be blamed on others – greedy businessmen, oil cartels, workers demanding higher wages, etc.

Since central banks have complete control of the money supplies of the world, when inflation is properly understood its cause can be directly traced to them, which may lead to some inconvenient – for the banksters at least– inquires such as: “How did they attain such power and privilege?”

Redefining inflation has been done to disguise and shift focus away from the actual cause of what America and many economies of the Western world are now experiencing in the startling rise in both producer and consumer prices.  This is the result of the central banks’ expansion of the money supply to mind-boggling proportions purportedly to fight the corona plandemic, but in reality it has been done to offset the financial implosion which began in late February/March of 2020 before the unnecessary and destructive lockdowns began.  The lockdowns and closing of the economies gave cover for the Federal Reserve and central banks to create vast amounts of money and credit to salvage, and then re-inflate a bubble in the stock and asset markets.   

An accurate account of the matter will show that the financial collapse of the system really began in the fall of 2019 as the “repo” market began to meltdown, causing the Fed to intervene with injections of “liquidity” to keep interest rates from spiking.  However, just like the meaning of inflation has been corrupted, so has the narrative of the financial collapse of 2020 been purposely skewed.

As a separate discipline, economics developed in large part in reaction to British Mercantilism of the 18th century.  Economic theory was used by authors such as Adam Smith in his Wealth of Nations to debunk the system of regulations, taxes and subsidies that the British government imposed.  Such economists, as did later schools of thought, most notably the Austrians, used economic thinking and its terms to expose the baneful effects of government intervention, fiat money, and the benefits of free trade. 

Over time, however, most economists became corrupted and instead of acting as a check on state power, became champions of regulation, central banking, and all sorts of social engineering schemes.  Economists were paid for their sell out with cushy positions and jobs in the state apparatus to manipulate language and doctrines. 

Today, an inflation rate of 2% is regarded by Fed officials as good for the economy and something monetary policy should try to achieve.  Previously, a rise in prices of 2% was seen for what it was – a loss of purchasing power hurting the middle and lower classes the worst while benefiting the wealthy.

For those who seek to rid economics or, for that matter, all the social sciences of deliberately misleading language and terms, George Orwell’s works are indispensable.  It is, therefore, incumbent for truth seekers of all persuasions to do so not only for their own benefit, but to maintain the sage author’s legacy.

*https://libcom.org/files/Politics%20and%20the%20English%20Language%20-%20George%20Orwell.pdf

Antonius Aquinas@AntoniusAquinas

https://antoniusaquinas.com

 

The Fed’s “Inflation Target” is Impoverishing American Workers

19 Replies

Powell   Fed Chair Jerome Powell apparently doesn’t see the pernicious effects of inflation

At one time, the Federal Reserve’s sole mandate was to maintain stable prices and to “fight inflation.”  To the Fed, the financial press, and most everyone else “inflation” means rising prices instead of its original and true definition as an increase in the money supply.  Rising prices are a consequence – a very painful consequence – of money printing.

Naturally, the Fed and all other central bankers prefer the definition of inflation as a rise in prices which insidiously hides the fact that they, being the issuers of currency, are the real culprit for increased prices.

Be that as it may, the common understanding of inflation as rising prices has always been seen as pernicious and destructive to an economy and living standards.  In the perverted world of modern economics, however, the idea of inflation as an intrinsic evil has been turned on its head and monetary authorities the world over now have “inflation targets” which they hope to attain.

America’s central bank is right in line with this lunacy, as it has been reported that at the Fed’s “May minutes” it wants “a temporary period of inflation modestly above 2 percent [which] would be consistent with the Committee’s symmetric inflation objective.”* Translated into understandable verbiage, the Fed wants everyone to pay at least 2% higher prices for the goods they buy.

Yes, by some crazed thinking US monetary officials believe that consumers paying higher prices is somehow good for economic activity and standards of living!  Of course, anyone with a modicum of sense can see that this is absurd and that those who espouse such policy should be laughed at and summarily locked up in an asylum!  Yet, this is now standard policy, not just with the Fed, but with the ECU and other central banks.

The baneful consequence of this economic quackery is being felt by American workers as admitted by the Labor Department.  Instead of spurring expansion, inflation is eating into and depressing wages:

For workers in ‘production and

nonsupervisory” positions, the value

of the average paycheck has actually

declined in the past year.  For those

workers, average ‘real wages’ – a

measure of pay that takes inflation

into account fell – from $22.62 in

May 2017 to $22.59 in May of 2018.*

While the decline in nominal wages is not significant, the manner in which the government now calculates inflation has been skewed to understate its impact.  Under the previous calculation, the current US inflation rate is probably closer to 5%.

Wage stagnation is not new.  Average real wages peaked more than 40 years ago and have fallen in real terms ever since.  Not surprisingly, the drop in wages in real terms began soon after the US went off the last vestiges of the gold standard in 1971.

As sound theory has long ago demonstrated, the idea of economic growth through money printing is absurd.  Increases in living standards and real wages can only come about through savings, investment, and capital accumulation.  Workers who have superior tools and equipment are obviously more productive than those that do not. Yet, capital goods have to be produced and production takes place over time.  Savings allow for the production process.

The level of wages are also closely linked to savings.  The greater savings an economy has enables entrepreneurs to bid for workers and increase wage rates.  This is how wages rise – competition for labor among businessmen pushes up wage rates.  The more savings entrepreneurs have, the higher they can bid for employees.

How and why wage rates rise and how employment is created had been understood by economists of yesteryear.  Today, however, the profession is dominated by “inflationists” and monetary cranks who believe that nearly every economic problem can be solved by the printing press.  Anyone who holds such ideas cannot be taken seriously.

While the Federal Reserve may think an inflation target will create prosperity, the reality for real wages is quite the opposite.  The laws of economic science have not been repealed.  An inflation target will lead to the impoverishment of not just workers, but lower living standards for all.

inflation target.jpg

*Jeff Stein and Andrew van Dam, “For the Biggest Group of American Workers, Wages Aren’t Just Flat.  They’re Falling.”  The Washington Post.  16 June 2018 A10.

Antonius Aquinas@AntoniusAquinas

https://antoniusaquinas.com

Donald and the “Maestro”

16 Replies

trump-ii            greenspan-ii

Former Federal Reserve Chairman Alan Greenspan, who was once laudably referred to as “Maestro” for his supposed astute stewardship of U.S. monetary policy, commented last week on the nation’s current political and economic climate:

We’re not in a stable equilibrium.  I hope

we can all find a way out because this too

great a country to be undermined, by how should

I say it, crazies.*

Well, if there is anyone who knows how to “undermine” an economy, it is the Maestro, since it was his “crazed” policies that brought about the 2008 financial crisis which ushered in the Great Recession that continues to this very day.

In a demonstration of how truly clueless Greenspan is about economic conditions, he cautioned that the U.S. is “headed toward stagflation – a combination of weak demand and elevated inflation.” Memo to the Maestro: stagflation is already here and has been for quite a while, especially when real economic gauges are used instead of the phony baloney numbers routinely lied about by the BLS and other corrupt state agencies.

The “crazies” that Greenspan refers to are, of course, the “deplorable” Trump supporters and The Donald himself, who the Maestro contends is responsible for “the worst economic and political environment that I’ve ever been remotely related to.” Oh, poor Alan has to suffer through an election where one of the candidates has not been approved by the ruling class.  Too bad.

Instead of carping about the current state of political affairs which, at least financially, he and his successor, Helicopter Ben Bernanke, largely contributed to, Greenspan should be grateful that he has had no reprisals for the financial crimes, chaos, and misery that he has afflicted upon the world.  Instead of significant jail time or worse, Greenspan is free to pontificate on current events, receiving hefty financial remuneration, and just as important for top members of the governing elite, ego-enhancing hosannas!

While Ben Bernanke has been a lifelong committed Keynesian and inflationist, Alan Greenspan, at least in his younger days as a member of Ayn Rand’s circle, was a free marketer who spoke positively about the efficacy and moral soundness of a gold standard.  That he abandoned these beliefs to go over to the Dark Side is further cause for retributive justice.

Greenspan’s betrayal was similar to those economists of the 1930s (Lionel Robbins most notable) who were followers of the teachings of Mises and Hayek, yet were swept away by the fanciful Keynesian deluge of the day and abandoned their economic senses and conscious for similar allurements which seduced the Maestro.  Had these economists as well as Greenspan stuck to their original principles, the world may not be in its current financial mess.

While Greenspan was lamenting the state of political affairs, the head “crazy,” Donald Trump, commented on the Maestro’s former place of employment.  Unlike the Maestro, the financial media, and just about every other politician, Trump had some perceptive things to say about the nation’s central bank, showing again that the billionaire businessman’s political acumen is quite good:

The Fed is being totally controlled politically because

Obama wants to go out with no stock market disruptions.**

The Republican Presidential hopeful could have easily added that the Fed’s policy is being deliberately carried out to ensure his Democratic opponent’s victory this fall.  A booming stock market is perceived by most as an indication of a vibrant economy.

Trump does not buy the supposed “independence” of the Fed from political influence and the conduct of monetary policy solely for the well being of the economy:

If it was a choice between the right decision and a political

decision… The Fed would choose the political decision.

Throughout the campaign, Trump’s instincts on political and economic matters have been quite good and hopefully if he does become chief executive those instincts will translate into positive change.

A Clinton Presidency would assuredly mean a continuation of the ruinous policies of Greenspan and his successors.  The election of Donald Trump could not only mean a new direction in monetary policy, but the public demotion of the likes of Alan Greenspan who will hopefully fade into the sunset never to be heard or seen from again.

*Rich Miller, “Greenspan Worries That ‘Crazies’ Will Undermine the U.S. System.”  Bloomberg.  14 September 2016.  http://www.bloomberg.com/news/articles/2016-09-14/greenspan-worries-that-crazies-will-undermine-the-u-s-system

**Tyler Durden, “Trump Slams ‘Totally Politically Controlled’ Fed, Sees No Rate Hike Until Obama Has Left.”  Zero Hedge. 15 September 2016.  http://www.zerohedge.com/news/2016-09-15/trumps-slams-totally-politically-controlled-fed-sees-no-rate-hike-until-obama-has-le

Antonius Aquinas@AntoniusAquinas

https://antoniusaquinas.com/