The Federal Reserve Is The “Enemy of the People”
In 1977, the Fed’s mandate shifted to “promote effectively the goals of maximum employment, stable prices, and moderate long term interest rates”. In short, the Fed has in effect become a central planning institution. Moreover, the Fed has decimated the return on savings for retirees and others who depend on income from their money market accounts and other financial instruments.
Instead of letting interest rates be determined by supply and demand in the financial markets, the Fed assumes it can “manage” one of the most important “prices” in the US economy.
Finally, consumers, especially low and moderate-income families, will be harmed further as price inflation will accelerate. The Fed, in short, is an “enemy of the people”.
2020:
The rich got richer
The country got poorer
And the bottom 50% got screwed. t.co/WELw7Bh6tu— Sven Henrich (@NorthmanTrader) September 2, 2020
When FED saying inflation above 2% it means : housing prices to grow above 2%. If we measure CPI as a housing market mostly, while food inflation exploding in line with declining wages, FED will have to buy all MBSes soon.t.co/Mj3YBzigu6 t.co/lyDcvrFHLj
— GregTheAnalyst (@Analyst_G) September 2, 2020
Ultimate Circle Jerk:
Fed gooses stocks
Congress feels less pressure to enact more stimulus
forcing the Fed to do more
causing stocks to go higher
making Congress feel even less pressure
Wall Street & top 1% win
Main Street loses
Bubble feeds on itself.— Sven Henrich (@NorthmanTrader) September 2, 2020
Cartoon of the Day: All-Time High t.co/LYYU2QrBcK pic.twitter.com/hnkh9R1W0P
— Hedgeye (@Hedgeye) September 3, 2020
Fed’s Balance Sheet Is Ballooning Out of Control: $7 Trillion in Securities, $2 Trillion Mortgages
The Fed Now Owns Nearly One Third of All US Mortgages.
Nearly $7 Trillion in Securities, $2 Trillion Mortgages
As of August 26, 2020 the Fed’s Balance Sheet is nearly $7 trillion total of which $3.7 trillion are notes or bonds, and nearly $2 trillion in mortgages (Fannie Mae, Freddie Mac, or Ginnie Mae).
No End in Sight to Fed’s Mortgage Buying Spree
Bloomberg reports No End in Sight to Fed’s Mortgage Buying Spree.
Key Points
- The Fed has snapped up $1 trillion of mortgage bonds since March. It bought around $300 billion of the bonds in each of March and April, and since then has been buying about $100 billion a month.
- The Fed now owns almost a third of bonds backed by home loans in the U.S.
- Buying the securities has pushed mortgage rates lower, with the average 30-year rate falling to 2.91% as of last week from 3.3% in early February.
- Morgan Stanley analysts pointed out in late March that the buying was running at eight times the pace seen in prior episodes of Fed purchasing under programs known as quantitative easing.
- Just before this latest round, principal payments from its mortgage bond holdings had whittled that down to 21%, but it has now increased back to 30%.
- If the Fed maintains its current buying pace, it will again own 34% of the mortgage universe by year’s end.
Survey by the Fed Finds Widespread Pessimism About Economic Future
The report said that echoing across the country is the continued uncertainty stemming from the pandemic and its negative effect on consumer and business activity.
S&P Reaches Critical Resistance, Valuation At Record High As Liquidity Crashes
The S&P 500’s P/E multiple just broke above the all-time highs from the dotcom bubble…