“Not QE4” The Fed’s Final Move Before: Full Krugman

So why not?

It’s easy to make sententious remarks to the effect that we shouldn’t look for gimmicks, we should sit down like serious people and deal with our problems realistically. That may sound reasonable — if you’ve been living in a cave for the past four years.Given the realities of our political situation, and in particular the mixture of ruthlessness and craziness that now characterizes House Republicans, it’s just ridiculous — far more ridiculous than the notion of the coin.

Paul Krugman “Be Ready To Mint That Coin” NYT January 7, 2013

As I may not be a Nobel Prize winning, Ph.D’d economist professor. I do seem to posses something far more valuable than any title, “shingle,” media and “think tank” speaking gigs, etc., etc., etc. that appease little more than a cadre of so-called “intelligentsia.”

That “something,” of course, is: common sense. Because the more they profess – the more evident it becomes they are barren of any.

Last week we were once again “schooled” by another of this same cadre of Ivy Tower styled elitists from non-other than The Federal Reserve and its now Chair Mr. Powell, where he profoundly expressed that increasing the Fed’s balance sheet “is not QE” (quantitative easing).

This is now making my childhood viewings of Romper Room® down right scholarly in comparison.

If you think this is hyperbole? Let me give you another recent quote from another Fed official, reported, once again, from the New York Times™, where supposedly all the “smart-crowd” gets their information. Ready? To wit:

“It’s not a change in our policy stance,” the president of the Federal Reserve Bank of Minneapolis, Neel Kashkari, said in an interview Friday.

“Fed Unveils Plan to Expand Balance Sheet but Insists It’s Not QE” NYT Oct. 11, 2019

Let me go back to use a little common sense argument, if I may. And since I brought up Romper Room, let me use the following example for your “noodling.” Ready?

Precisely one year ago the Federal Reserve was on a path to increase rates, reduce its balance sheet by 50 $Billion per month. So confident of its position and reading of the economy that its Chair, Mr. Powell uttered the most feared words on Wall Street known as “autopilot” to signify that the Fed was indeed following through on its stated and professed course.

Insinuations or inferences to any market gyrations were of little to no concern regarding monetary policy. A clear path and schedule had been laid out over a year prior by then Chair, Ms. Yellen.

Mr. Powell was just implementing, signalling “You’ve been warned this is coming and now it’s here – deal with it.”

Then, the “market” did just that – and Mr. Powell and the entirety of the Eccles Building have been trying to deal with what was not suppose to happen “in our lifetime” as implied by Ms. Yellen. i.e., Another financial crisis.

Hint: It’s been Crises-R-U.S. ever since.

In about 90 days the “market” went from making never before seen in human history all time highs – to entering a Bear Market (e.g., 20% downdraft from those same highs) right before Christmas. That is, until the now infamous “Call from Cabo” came through from the Treasury Secretary to assure everyone (my conjecture) on Wall Street “Ol’ Saint Nick” would make an appearance, even if that meant giving the president his gift early, which was a pallet of new phones all pre-programmed to Twitter™ and Mr. Powell’s personal email account.

Now we have the Fed not only reducing its original “autopilot” schedule for reducing the balance sheet. But rather, they have stopped it all together.

“But wait, there’s more!” as they say on late night TV. Actually, much, much more…

They also went from raising rates – to cutting rates twice in this same period. And: it’s expected, at the least, one more before year end. The idea of it being two more is also a distinct possibility, if not probability.

That 50 $Billion “autopilot” schedule of reducing the balance sheet? That’s now been jettisoned entirely and replaced with (wait for it…) an “initial” 60 $Billion per month purchases of Treasury Bills (remember – you’re also told that’s not monetizing debt, but I digress).

So, back to my children themed rational. Using Sesame Street® this time, because it truly does fit more than what the so-called “smart crowd” wants to portray. I ask the question in song and let you decide. Ready?

🎶”One of these things is not like the other. One of these things just doesn’t belong.” 🎶

Oh, that’s right, you would need to know why one didn’t belong in the first place. Sorry, I thought I made that clear: just use the quote above “It’s not a change in our policy stance.” from the Fed. Again, I’ll let you decide for yourself, but the answer appears to be far more obvious than the same Fed believes (as in hopes) people will see it for what it truly is. e.g., Abject policy and implementation failure. Period.

Now back to: “Full Krugman.”

The issue currently is two fold, the first: What if any, if not all this new “NotQE4” money doesn’t get put back to use in the so-called “markets” or economy? But instead, is horded by the very entities the Fed is hoping will use it to push the “Velocity” principle? (e.g., M2V)

Hint: Expect “Full Krugman.” Maybe even squared or cubed! Who knows, maybe to “Infinity and beyond!” if we stick with the scholar theme.

Just because the empirical results of theories and claims made by Nobel Laurette Ph.D’d professors teaching your kids at schools costing those same “kids” the basic equivalent of a lifetime of bankruptcy worries and more are undeniable. That doesn’t mean the Fed still won’t follow them, even though the once picturesque socialist utopia professed by this same cadre (Stieglitz anyone?) known as Venezuela crumbles further into oblivion. All the while as its people wander the streets eyeing once household pets – as food. The zoo animals have long ago met such fate.

“How can I make such a statement?” you say. Easy. Just look at where the current Fed is positioning itself today from where it was just a year ago. As one of my hero’s Andrew Carnegie is famous for saying (paraphrasing) “The older I get, the less I listen to what people say, and the more I watch what they do.” The Fed’s recent actions speak volumes if you are truly paying attention.

So does this mean we’re getting a $Trillion dollar coin? I have no idea, but something akin to it is far closer to being put squarely on the monetary table than any theoretical coin, and that is MMT aka “Modern monetary theory,” which also encompasses such wonderful ideas like “Helicopter money” and more.

Again, the implied “beauty” of all this clap-trap thinking for monetary policy, is that it’s all wrapped up with a nice big theoretical bow for cover, which is…

No need to produce anything such as a physical coin. Just hit “Control-P” and just like magic! Everyone’s got a brand new bag of “cash.” Just like the Fed has been done prior and is, once again, doing so with the banks.

“A brand new bag” is metaphorical of course. More like some new version of an EBT type card or such. Because, if it does see the light of day, which is now a 50/50 bet, in my humble opinion, it’ll include everyone. And by that I mean just that – everyone.

If you think this is crazy talk now? Go back to the opening quote of this article, all while remembering, that the original idea for needing a “$Trillion Dollar coin” was to circumvent one political party from holding the other one hostage from spending. How’s that all working? And that’s with no coin!

That’s why I use “Full Krugman,” because the original thesis when compared to where we are today wouldn’t even be considered worthy of half-measure status. That’s how far down the rabbit hole of lunacy we now are. Think about it.

The only thing someone with any remaining common sense can do as to help persuade the Fed from taking the final step into monetary Armageddon comes from the movie “Tropic Thunder” (2008, DreamWorks™) that inspired the “Full…” moniker quote to begin with. To wit:

“Never go full…”

But then again, they haven’t listened to people like myself, ever. Even though we are the ones being proved correct with every passing policy decree.

Every. Single. One.

© 2019 Mark St.Cyr