Ep. 118A – Good Little Central Bankers

The Kapital News
The Kapital News
Ep. 118A - Good Little Central Bankers

Yesterday was the US Constitution day and today is Fed day. And the Fed did not disappoint. The markets were expecting a rate cut of 25 basis points and that’s exactly what the Fed did. There has been some chatter about the overnight lending market and how the Fed has had to intervene and inject tens of billions of dollars to ensure that markets were properly funded. This is basically QE, but by a different mechanism. QE was injecting around $50 billion a month into the system – this recent action was at least $54 billion on an overnight basis! When asked during his press conference about this, Jay Powell, the Chairman of the Fed, stated that it was due to corporate taxes being due as well as US Treasuries maturing. He also noted, perhaps ironically, or ominously, that this is “contained.” Former Fed Chairman, Ben Bernanke, said that sub-prime was “contained,” and we all know what happened next. The Kapital News continues to believe that the Fed will continue with its easing cycle. This does not mean that every meeting will result in a rate cut, but this will be the direction in both subsequent action and communication. The Fed was not the only central bank to cut rates today. The lineup includes: Hong Kong, Jordan, Brazil, Saudi Arabia, and UAE to name a few. In addition, the BOJ held steady, but signaled that more easing is likely in October. Further, we have higher unemployment in Australia, which is likely to lead to lower rates down-under as well. The Reserve Bank of Australia has made it explicitly clear that a lot of their rate decision making process will be predicated on unemployment – and we also know from recent meeting minutes that rates will be lower for longer. So, what we have here is a race to the bottom. And a thinly-veiled acknowledgement that lower interest rates, zero interest rates, negative interest rates, and QE are not working. Especially not to the extent that they “worked” a decade ago when these were “new” and “experimental” and “temporary” policies. Now they appear to be etched in stone and signed in blood with no end in sight. This is diminishing marginal returns at its best and this is a flawed and fraudulent monetary policy at its worse. There is much more to come and this simply pushes people, corporations, governments, and even central bankers, further out onto the risk curve. Stay diversified, stay vigilant, and stay with The Kapital News. #EndTheFed #Recession #Economy #Invest #InterestRates #Politics #Stocks #Peace #WakeUpAmerica

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