August 3, 2020
Mr. Kashkari (ironic name for this guy), president of the Minneapolis Federal Reserve Bank is claiming that we will have a better economic recovery if we lock down again in an effort to contain the SARS-CoV-2 virus:
“Neel Kashkari, president of the Minneapolis Federal Reserve Bank, said the nation needs to control the spread of the virus, which is increasing across much of the country, to get back on a path to economic health.”
He went on to say this:
‘He also said that Congress can afford large sums for coronavirus relief efforts, though Republican lawmakers are looking to lessen the amount of supplemental aid for unemployed Americans as part of the next relief bill.
“Right now, the U.S. can fund itself at very, very low rates. Congress should use this opportunity to support the American people and the American economy. I’m not worried about it,” he said. “If we get the economy growing, we will be able to pay off the debt.”’
I think this is a banker’s game – bury people in debt and make them slaves. There is a reason that debt instruments are called “bonds” – they put people in bondage. What does Mr. Kashkari think will happen to loans, mortgages and leases as businesses are closed for another month to six weeks?
We also get this line of malarkey from MSN Money:
“It’s a rapid reversal in fortune. Early on in the pandemic, the dollar soared after investors sought safety in U.S. assets like Treasuries while the virus stormed through Europe. But with cases now exploding at home, the ineffectual American response to the disease has become a millstone for the currency, spurring concern about lasting damage to the U.S. economy that could keep interest rates and growth low for years.”
MSN Money blames dollar weakness on “…the ineffectual American response to the disease….”
I do not believe this for one second. I don’t know about you, but I like to buy low and sell high. Right now the dollar’s price or purchasing power is declining. Here is why:
“Absolute power and lack of accountability by the Fed are generally defended on one ground alone: that any change would weaken the Federal Reserve’s allegedly inflexible commitment to wage a seemingly permanent “fight against inflation.” This is the Johnny-one-note of the Fed’s defense of its unbridled power. The Gonzalez reforms, Fed officials warn, might be seen by financial markets “as weakening the Fed’s ability to fight inflation” (New York Times, October 8, 1993). In subsequent Congressional testimony, Chairman Alan Greenspan elaborated this point. Politicians, and presumably the public, are eternally tempted to expand the money supply and thereby aggravate (price) inflation. Thus to Greenspan:
‘The temptation is to step on the monetary accelerator or at least to avoid the monetary brake until after the next election. Giving in to such temptations is likely to impart an inflationary bias to the economy and could lead to instability, recession, and economic stagnation.’”
Mr. Greenspan told us here that “money” printing is the cause of “…an inflationary bias to the economy….” I think he misused the term “inflation” here to refer to a general rise in prices or general decline in the purchasing power of the USD.
Lets take a look at how hard the Fed stepped on “the monetary accelerator” beginning in February 2020. The week ended February 19, 2020 the total assets held by the twelve Federal Reserve Banks stood at $4,171,570 millions (4.171 trillion). That means the twelve Federal Reserve Banks had the exact same amount in liabilities. The liabilities are basically “money”. Some of that “money” is what the banks call reserves and that “money” stays on “deposit” at the Fed for the most part. Now we will fast forward to the week ended June 4, 2020. The total assets held by the twelve Federal Reserve Banks at that time was $7,165,217 millions (7.165 trillion).
In the space of twelve weeks the Fed nearly doubled its liabilities. This means that the “money” supply nearly doubled. The increase in twelve short weeks was only slightly less than what occurred over about three years from 12/2007 to 12/2014 ($3.623 trillion). I know that a substantial portion of that increase will stay within the banks and will not come out to Main Street, although in theory it could. Historically the banks held almost nothing in “reserves”. It wasn’t until September 2008 that the banks began to hold such a huge amount of “reserves”.
Here is why banks are willing to leave those “reserves” on “deposit” at the Fed:
“On October 3, 2008, Section 128 of the Emergency Economic Stabilization Act of 2008 allowed the Federal Reserve banks to begin paying interest on excess reserve balances (“IOER”) as well as required reserves. The Federal Reserve banks began doing so three days later. Banks had already begun increasing the amount of their money on deposit with the Fed at the beginning of September, up from about $10 billion total at the end of August, 2008, to $880 billion by the end of the second week of January, 2009. In comparison, the increase in reserve balances reached only $65 billion after September 11, 2001 before falling back to normal levels within a month.”
What we have seen is a huge and unprecedented increase in “bank money”. Essentially this was stepping on “…the monetary accelerator….” Mr. Kashkari and his shill MSN Money are using the SARS-CoV-2 as cover. The strategy recommended by Mr. Kashkari will simply create MOAR “assets” for the banks or IOU’s as the Congress borrows every MOAR “money” to bail out the locked down businesses. Oh, and I wonder what businesses will receive that bailout “money”. Will small “Main Street” businesses receive it? I doubt it. I suspect it will be the large corporations that are important to our “representatives” in Washington.
So, as the supply of “money” goes up, its price or purchasing power goes down. It may be too late to sell already, but it is no wonder that dollar is being sold.
Have a nice day!