Tyler Durden [TD]Trump Is Considering Firing Fed Chair Powell
[MD] This article is illustrative of what you see in the behavior of a “flawed money process”. Let’s take it point by point, always keeping in mind that “Money is an in-process promise to complete a trade over time and space.” It is “always and only created by traders making such promises and getting them “certified” (open to transparent scrutiny) by a “real money process” … not the corrupt and contrived process we have all always traded under.
[MD] A proper “real money process” has no chair to fire. It doesn’t even have a central authority requiring a chair.
[TD]if amid the barrage of negative news hitting the market this quarter there has been one outstanding item which would have sent it sharply (even) lower, that would be a flashing red headline – or a tweet from the president – announcing that Trump has fired Fed Chair Jerome Powell.
[MD] A real money process can’t be manipulated. Thus, it wouldn’t even notice such a tweet, let alone change behavior in the face of it.
[TD] And while to many such an act would seem unthinkable, even from someone as unorthodox and unpredictable as Trump, it now appears that’s precisely the outcome the market will have to worry about next as Bloomberg reports that the president has discussed firing Federal Reserve Chairman Jerome Powell “as his frustration with the central bank chief intensified following this week’s interest-rate increase and months of stock-market losses”, citing four people familiar with the matter.
[MD] This is likely all just theater setting up the trip-wire in the money changers’ farming operation … i.e. the so-called business cycle.
[TD] While advisors in Trump’s inner circle have rightfully warned him that firing Powell would be a “disastrous move” for stock prices, and instead are “hoping that the president’s latest bout of anger will dissipate over the holidays”, the sources reveal that the president – who is facing the imminent departure of two of his closest advisors, chief of staff Kelly and secretary of defense Mattis – has talked privately about firing Powell many times in the past few days.
[MD] Think about it. In a real money process such manipulation would be impossible. Yet with our corrupt process, it is tactics.
[TD] Still, even Trump likely realizes that any attempt to push out Powell would have a devastating effect on the one barometer of his presidency he holds dearest to his heart – the stock market – and not only that, but terminating the Fed chair would likely send a shockwave across global financial markets, resulting in a collapse of risk asset prices and undermining investor confidence in the central bank’s ability to guide the economy without political interference. Worse, it would come at the worst possible time, just as markets are in freefall in recent weeks, with the Nasdaq just entering a bear market and the S&P less than 3% away from being 20% down from its all time highs.
[MD] A real money process has no connection to markets whatever (and vice versa). Notice how a real money process makes all these very serious problems simply vanish!
[TD] It is likely that any move against Powell would be met by considerable legalistic resistance as it is unclear how much legal authority the president has to fire Powell, as the Federal Reserve Act says governors may be “removed for cause by the President” and since the chairman is also a governor, that umbrella definition also extends to him. Even so, the rules around firing the leader are legally ambiguous according to Peter Conti-Brown of the University of Pennsylvania notes in his book on Fed independence.
[MD] Ah … the law. That’s what they introduce to dilute principles. With 40,000 new laws every year, the law is beyond total idiocy. Return to principles. The golden rule (principle) is usually all that’s needed. In this case they need new law … because what they have is badly written law. But observe, no new “principle” is needed. Why dilute principle with laws when it has such negative impact on principles it attempts to parse? And “Fed Independence?” Since a real money process is natively totally independent and immune to manipulation, independence is no issue.
[TD] Additionally, while the Fed is independent only on paper, and history is replete with examples of presidents influencing monetary policy in the past, most notably when LBJ literally attacked then Fed chairman William McChesney Martin, there has yet to be an instance of an acting Fed chair being fired by the president.
[MD] “independent only on paper”? So George Bush tripped over a correct observation: “the Constitution is just a piece of paper.” What a great testament that is to any legal system… not!
[TD] Such a move would represent an unprecedented challenge to the Fed’s independence. Though he was nominated by the president, Powell was thought to be insulated from Trump’s dissatisfaction by a tradition of respect for the independence of the central bank.
[MD] All laws are unprecedented … until they become precedents … which happens virtually immediately. Look at West Law for any statute. They are immediately ruled on all sides of the issues they claim to address. Ridiculous! And “tradition of respect for the independence of the central bank.” That’s respect for the Rothschild family. I have no such respect.
[TD] That separation of politics from monetary policy is supposed to instill confidence that Fed officials will do what’s right for the economy over the long term rather than bend to the short-term whims of a politician.
[MD] Don’t you see? “Monetary policy”? A proper real money process has “no policy knobs”. It’s just simple arithmetic. Traders are free to create money any time they see fit … which means any time they can see clear to deliver on a promise over time and space. If they fail, the immediate and natural negative feedback mechanism of meeting DEFAULTs with INTEREST collections of like amount guarantees stability and ZERO INFLATION. The manipulators can’t screw with the knobs when there are no knobs to screw with.
[TD] The reason behind Trump’s ire is simple: he sees the Fed’s rate hikes as the cause behind the market’s recent slump, and after explicitly “urging” the Fed not to hike rates last week, saying Powell was “being too aggressive, far too aggressive, actually far too aggressive” and telling Reuters the central bank “would be foolish” to proceed with a rate hike, he may well see Powell’s “not so dovish” rate hike as an open act of defiance – usually a career-ending move for anyone who ultimately is accountable to Trump.
[MD] Rate hikes always signal the beginning of the money changers’ harvest season. Traders (with in-process money creating promises) get thrown off balance and the money changers take their stuff for pennies on the dollar. It’s how the farming operation works. They call it the business cycle. Greenspan was the best flunky the traders have ever had. He didn’t change rates. What’s worse than non-zero rates is rates that are not predictable over the time span of a trader’s promise. It’s a built in rug puller!
[TD] The irony is that just over two years ago, Trump attacked Powell’s predecessor, Janet Yellen, for creating a stock market bubble with her dovish policies: in Sept 2016, Trump accused the the Fed of “keeping the rates artificially low so the economy doesn’t go down so that Obama can say that he did a good job. They’re keeping the rates artificially low so that Obama can go out and play golf in January and say that he did a good job. It’s a very false economy. We have a bad economy, everybody understands that but it’s a false economy.”
[MD]”artificially low” rates? Zero is the proper rate. Anything else is artificially high! A real money process cares nothing about the economy. It’s just a mechanism for traders to span time and space with their trades. It’s more efficient than a forced double trade … e.g. trade what you have for gold; carry gold to another place and time; trade gold for what you wanted in the first place. And it’s not the economy that is false. It’s the money that underlies all trades that is being jerked around and is therefore false.
[TD] Two years later, when the same “false economy” belongs to Trump, the president has changed his tune, and his ideal Fed chair would be none other than Janet Yellen (whom Trump refused to reappoint for being “too short.”)
[MD] Well duh! That’s what money changers, governments they institute, and puppets they employ do … that’s their job … that’s their skill. Those with scruples need not apply.
[TD]The even bigger irony is that Powell finds himself in a lose-lose situation: on one hand he can merely perpetuate the unsustainable asset bubble created by his predecessors Greenspan, Bernanke and Yellen whose inevitable bursting would have devastating consequences on the financial system (which, however, he can leave to his successor as both Bernanke and Yellen did), or he can bit the bullet and be the one responsible for at least attempting the renormalization of monetary policies, an even which inevitably lead to far greater pain for those who invested in said bubble.
[MD] “Unsustainable asset bubble”? This so-called bubble is sustainable as long as traders can deliver on their money creating promises. That’s what determines sustainability. And jerking them around makes that impossible for them. So given the chance they just roll the dice. What do they have to lose? Like governments in this environment: they just reset and start over. Some winners, lots of losers, and the clown is once again high, dry, and looking for a ball player.
[TD] Furthermore, when Trump signed up for the presidency he should have picked one of the two options: the fact that he did not and two years later decided to continue on the autopilot set previously by the Fed is precisely why it is Trump who will now have no choice but to be the fall guy for the mess prior administrations, and previous Fed chairs created.
[MD] Just think about the worst thing that could happen to the money changers, the governments they institute, and their operatives like Trump. That is traders telling them all to “go pound sand”. That they’re instituting a “real” money process to compete with the one they have been forced to use (due to no other alternative). Poof! It all falls down and the traders are jubilant.
[TD] Trump’s public and private complaints about members of his administration have often been a first step toward their departures — including former Attorney General Jeff Sessions, his first Secretary of State Rex Tillerson and outgoing chief of staff John Kelly.
[MD] Pretend you were elected president. Look at all the positions you have to fill immediately. You can’t. So you rely on advisors (almost exclusively tribe members). And then slowly you see where they’re eating you alive and you one-by-one replace them with someone you think can do the job. What’s really wrong with all of this is that people first think that government is the solution to everything … when it fact is the solution to nothing.
[TD] And while it’s not just Powell who is on the chopping block as some of Trump’s recent anger has also been directed at Treasury Secretary Steven Mnuchin for his part in persuading the president to select Powell to lead the Fed, the fact that Powell’s tenure is now in jeopardy and that the Fed Chair could be fired after even a mere sharp drop in the market – with an S&P500 bear market looming as a likely psychological catalyst – will lead to a self-fulfilling prophecy as traders will now sell merely on the fear of, and frontrunning the news that Trump has fired Powell precisely as a result of such selling.
[MD] Write your own comment. You’ve been well briefed.