I’m so busy and tired that I forgot to send out last week’s email. If you missed episode 94 with Tim Delmastro, then be sure to check it out!
Not only am I exhausted from life, work and parenthood, but I’m also fed up with Janet Yellen and the Federal Reserve. Next week, the Fed is “almost guaranteed” to raise interest rates for the third time at “the most important Fed meeting ever.” The hype and fanfare is nauseating.
The Fed hasn’t even raised rates to the 1% bottom that Alan Greenspan achieved, which created last financial crisis. Now people like Steve Liesman are still acting like the “geniuses” at the Fed have done the impossible. “They saved the U.S. economy,” they tell us, but they have only served to secure a more fateful demise.
Like a man attempting suicide by climbing several more flights of stairs, the Fed has only ensured that we will be falling from a greater height when we finally leap. The truth is that we’re probably already falling, but we think we’re ok because we haven’t hit pavement yet.
Be sure to check out our episode with musician Gene Goodman, and protect your savings from the Fed with Goldmoney!
On Tuesday, January 5th, former Dallas Federal Reserve President Richard Fisher appeared on CNBC, and the admissions he made were both refreshing and shocking. Fisher’s candor was the best CNBC footage since Jim Cramer’s 2007 on-air meltdown. Fisher admitted that the artificial gains in the stock market can be attributed to quantitative easing and 0% interest rates. “We frontloaded a tremendous market rally,” Fisher said proudly. This was a rare piece of truth coming from a former member of an organization that typically lies with impunity.
Fisher’s statements left his CNBC interviewers surprised, especially his comments about the “overpriced” stock market. Fisher tried to defend himself saying he didn’t vote for QE3, but that’s like Rob Schneider saying he didn’t make a third Deuce Bigalow movie. As anyone who has seen Male/European Gigolo can attest, the damage had already been done. Like Bernanke, Fisher rode off into the sunset and will not be blamed for the economic devastation that lies ahead. He now works for Barclays, and he serves on the boards of PepsiCo and AT&T.
The main takeaway from Richard Fisher’s ten year term with the Fed is that even he could not resist the temptation to tinker with the U.S. monetary system. In February 2015, Steve Matthews wrote, “As an interest-rate setter, Fisher has been an überhawk, the kind of policymaker who worries about inflation and asset-price bubbles even when neither is evident. That concern guided his consistent calls—and dissents at the Federal Open Market Committee—for a withdrawal of Fed stimulus as soon as possible.” It’s sad when even the ‘überhawk’ thinks QE is perfectly fine.
I covered the Fisher interview, along with many other topics, in episode 37 of Kennedy Financial, so please check it out if you would like to learn more.
After the failure to launch in September, I took to Twitter to challenge Fed faithful and Peter Schiff naysayer Scott Nations. Schiff and Nations got into a heated argument in July over whether the Fed would raise interest rates in 2015. Nations found it absurd that Schiff could suggest that not only would the Fed not raise rates, but QE4 was still on the table. Nations asserted that Schiff made “outlandish predictions.”
I reminded Nations that viewers like me had not forgotten what he said, and there would be no rate hike in 2015. To prove my certainty, I bet him one ounce American Silver Eagle. Nations, not understanding the value of real money, agreed instead to make a $50 donation to the winner’s favorite charity. Naturally, I selected a 501(c)(3) called the Ludwig Von Mises Institute.
When December arrived, the Fed shocked me by actually doing the right thing for the first time in nine years and raising the funds rate a quarter point. But Janet Yellen instructed the public “I think it’s important not to overblow the significance of this first move. It’s only 25 basis points. Monetary policy remains accommodative.” Although I lost my public Twitter battle with Nations, it became clear that the Fed and Yellen were not proud or confident in their first step.
With the dawn of 2016, the Fed will need to add more rate hikes to prove that the U.S. economy can withdraw from its long-term artificial monetary stimulus. I believe that after such a prolonged binge on this financial heroine that our zombie financial markets will come crashing back down to Earth before ever reaching their destination. Like the Challenger space shuttle tragedy, the liftoff for Yellen and the Fed may have received applause and awe, but these sentiments will be turning to shock when their monetary policy blows up in mid-flight.
It takes character to admit when one is wrong, and I am happy to do that here. Now that the Fed has finally made a move, the world will get to witness the full consequence of Keynesian monetary policy. By the Fed’s second or third meeting of 2016, it should be clear that the U.S. economy can’t handle increasing rates anymore than the Challenger could handle frozen O-rings. My $50 bet with Scott Nations was a small price to pay for admission to this upcoming spectacle.