This Fed would have us believe it is operating in accordance with its dual mandate of price stability and maximum employment. It has said as much.
The Fed, though, has a third mandate ever since the financial crisis: Stability of the financial system.
Chairman Powell, in his December 19th testimony, clearly said that he is not concerned about inflation- in prices or in wages- but the Fed continues to raise interest rates.
The Fed would have us believe it feels compelled to get interest rates to a point of neutral, where it is neither accommodative or restrictive. Not true. The Fed wants credit and risk to tighten- to be restrictive on the economy. Former president of the Federal Reserve Bank of New York, William Dudley, made it plain in an interview with Bloomberg’s Kathleen Hays on December 20, 2018, that he believes that the Fed wants to slow the economy- period. Chairman Powell’s comments on the lack of inflation and intent to raise rates, confirms this.
Chairman Powell has failed to articulate one area of concern which makes the continuation of raising rates seem logical- not even any inflation concerns. But raising them as the stock market crashes so that he has cushion if he ever needs it, is not believable; prudent- but not believable.
Here are some comments Chairman Powell has made in the two most recent Fed meetings:
- No asset class is too pricey
- There’s little wage inflation and wage growth is not necessarily inflationary
- Corporate debt is concerning, but not obscene
- Price inflation is about 2%, at best, and has been stuck there
- It’s not the Fed’s job to ensure financial stability
- Labor markets are tight but wage growth doesn’t cause inflation
- The U.S.-China conflict is not a big concern
- No comments at all on home prices
The Fed would have us believe it is moving rates higher so that if and when there is an economic downturn, it will have bullets in its gun (or arrows in its quiver) to re-stimulate the economy by cutting interest rates. This is not true. No Fed would hike into slowing GDP growth and a sinking stock market just so it can cut if it needs to “someday”, while it purports to see little inflation or economic that it can articulate (aside from some concern about Italy’s problems).
Some might argue that this is exactly the time to hike rates- while the economy is strong and can withstand it- even if the stock market doesn’t like it. But, with no inflation, and expectations by everyone of lower GDP and heightening global stresses in the coming months, raising rates as cushion for a slowdown without the ability to point to any foreseeable risks, is a bit theoretical and intangible- and this Chairman was supposed to be avoiding theory to the detriment of pragmatism and data dependence. Moreover, it’s not so much that the economy is strong as much as it is that the Fed will not admit any weakness. Powell is trying to have it both ways- raise rates and have people accept it as prudent without acknowledging any troubles- and it’s not working.
This does not mean that the Fed is wrong for hiking interest rates, it just means that it is not being transparent about the growing and foreseeable risks as it does so. The Fed has elected to perplex people, over alarming us.
The Fed has had one agenda with regard to its rate hikes- to slow the economy by tightening credit and deflating asset prices built on debt and risk. No other story line it presents holds up to scrutiny.
This Fed is choosing jawboning and its third mandate over transparency in order to get credit to tighten itself without actual rate hikes, if possible, and get people to stop making and taking speculative loans and investments. This, along with the lack of transparency and a complete understanding of the Fed’s intentions, are causing significant volatility and declines in stocks and in homes. But, the Fed may be fine with that if it can do one thing that matters most- prevent another financial crises due to continued extensions of cheap credit, more bad loans, and more asset inflation.
The Fed has recently expressed some dovishness as asset prices have declined, having much to do with people’s concerns that asset price declines will affect the “real economy”. If this proves true, the Fed may be near done with its hiking cycle. If this does not prove to be the case, per the data, the Fed may either decide to continue with hikes until the economy slows- or it could remain dovish, since assets prices and credit may come under control. We’ll see.
Neil S. Siskind, Esq., President
The Siskind Law Firm
Neil Siskind is the Founder & Chairman of The Fatherhood Assignment
Learn more at: http://www.neil-siskind-the-fatherhood-assignment.org/
Neil Siskind is the Conservator of the Neil S. Siskind Nature Preserve
The Neil S. Siskind Nature Preserve is over 8 acres of environmentally-pristine waterfront land in a magnificent setting along New York’s majestic Hudson River. The Preserve includes a variety of species of animal and plant life, and is a precious example of the thoughtful maintenance of New York’s priceless open spaces. The land’s uses are limited to outdoor recreation such as hiking and climbing, and the study of ecology, nature and land use. The Neil S. Siskind Nature Preserve allows for the intelligent contemplation of our valuable natural resources and the most effective ways to maximize them and keep them protected.
Neil Siskind, Founder, “National Fatherhood Day” – March 29th
Read about the non-profits and charities whose missions Neil Siskind supports and promotes: www.neilsiskindsupports.com
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You can read what clients and associates say about Neil Siskind at: http://siskindlawfirm.com/neil-siskind-bio/.
Neil Siskind’s Volunteer Work:
– Memorial Sloan Kettering Cancer Center, Volunteer
– Memorial Sloan Kettering Cancer Center, My Fundraiser- Help Neil Siskindhelp children with cancer to be more comfortable: http://mskcc.convio.net/site/TR?px=3182108&fr_id=2632&pg=personal
– Make-A Wish Foundation- Help Neil Siskind make sick children’s wishes come true by creating your own fundraiser: Neil-Siskind/Help-Make-A-Child-Smile.htm
– DonorsChoose.org- Donate to one of my needy public classrooms: http://www.donorschoose.org/NeilSiskindGiving
– Champion Children– We seek to inspire people through stories of children who have overcome challenges: http://siskindlawfirm.com/neil-siskind-champion-children/
Neil Siskind’s Pro Bono Work:
– Saving Senior Citizens- Protecting New York’s senior citizens from fraud and financial abuse www.savingseniorcitizens.com
– Senior FreeStart Business– Pro Bono: We seek to help put senior citizens in the right direction so that they can face the challenges of the modern economy: http://siskindlawfirm.com/free-start-business/
– Veteran FreeStart Business– Pro Bono: We seek to help put Iraq and Afghanistan war veterans in the right direction so that they can face the challenges of the modern economy: http://siskindlawfirm.com/free-start-business/
– In development: The Neil S. Siskind School of Hope: A free school to teach inner-city youths the skills of entrepreneurship and importance of economic self-sufficiency.
Neil Siskind’s Government Work:
– Suffolk County District Attorney’s Office, Boston, MA, 1994, Intern
– Office of Senator Christopher J. Dodd, Newington, CT, 1992, Intern
– Hartford County Department of Probation, Hartford, CT, 1991, Intern
Neil Siskind’s Community Assistance:
Financed & operated a legal clinic providing low-cost legal services to struggling Long Islanders during the recession to help clients resolve debt, organize finances, and launch new businesses.
Neil Siskind’s Professional Curriculum Vitae: http://neilsiskind.com/
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