Posted Mar 30, 2020 by Martin Armstrong
Here we go with the same old hypothesis over the Quantity Theory of Money that Trump is (1) nationalizing the Fed, (2) the Fed’s actions are worse than the virus, and (3) Forbes proclaims that the Trump & the Fed are destroying the dollar. It is really fascinating how these propositions running around are not only foolish, but the classic myopic view that the world begins at the California shoreline in the Pacific and ends on the beaches of Virginia at the Atlantic. Oh yes, there is Canada to the North and Mexico to the South. But who pays much attention to them anyhow. Canadians just come to America for holidays and Americans go to Mexico for a holiday and to eat Tacos.
The Washington Post showed not only its profound bias against Trump, but also its total ignorance of financial history and the Federal Reserve. They reported:
The economic debate of the day centers on whether the cure of an economic shutdown is worse than the disease of the virus. Similarly, we need to ask if the cure of the Federal Reserve getting so deeply into corporate bonds, asset-backed securities, commercial paper, and exchange-traded funds is worse than the disease seizing financial markets. It may be.
If the Washington Post ever bothered to do actual research instead of just promoting their personal political agenda, they might discover that the original design and purpose of the Federal Reserve was to support the economy directly. They were to buy corporate paper to PREVENT companies who could not borrow when banks were hoarding cash from laying off their employees. It was Congress that usurped the Fed for World War I and directed them to buy government paper EXCLUSIVELY. Congress effectively nationalized the Fed a long time ago transforming it into a quasi-government agency. That much the Washington Post is using to blame Trump.
The Washington Post’s slogan is Democracy Dies in Darkness. So, why are they constantly only pushing their political agenda? Are they not keeping the people in the dark?
They have conveniently forgotten that there was TARP where the government poured a trillion into banks who never lent out the money because they had no confidence in the future. They then turned and pleaded with the Fed to create the Excess Reserve facility. So, TARP only bailed out the banks but not the economy – hence no inflation. Already, Excess Reserves are rising again showing that banks are once more NOT lending but hoarding. Banks will ALWAYS act in their own self-interest. They are not there to support the economy.
This is the first time the Fed is returning to its original design – direct lending to the economy skipping the banks. The Washington Post is clueless because they look at everything as a way to bash Trump and hurt the country just for their personal political view.
Then we had Forbes Magazine which is trapped by the Quantity Theory of Money and like a fool who keeps sticking their finger in an electric socket and expecting a different result, keep declaring that increasing the supply of money will destroy the dollar. They even can’t figure out why the Euro rallied and of course just blamed Trump. Instead, they talk to biased crypto people who proclaim the Fed balance sheet will rise to $10 trillion and this results in the headline:
Donald Trump And The Fed Are Destroying The U.S. Dollar
They had the audacity to claim the rally in the dollar was ONLY short covering. These people are biased and have no idea of what is happening outside the United States. It very plain, Trump is NOT nationalizing the Fed. The Fed was a steady process of nationalizing it since World War I. For the FIRST time the Fed is departing from Keynesian Economics because it knows that won’t work. Europe needs this crisis because it has no power to deal with the economy when the central bank is trapped in negative interest rates. The ECB is now pushing CoronaBonds, because it cannot continue to support the European member states. Netherlands and Germany are opposed to the idea. The only way to break the backs of Netherlands and Germany is to propel this crisis as the justification to federalize Europe.
The Euro has rallied BECAUSE capital is being taken home to cover losses everywhere. These people are obviously ignorant of what a LIQUIDITY CRISIS is all about. At the WEC in October, we warned we were entering a Liquidity Crisis stemming from the rise in Country Party Risk and this would be a different crisis all together because we faced a Bond Bubble. What is unfolding should be no surprise. The markets have been showing this would be the outcome since the Repo Crisis began September 17th, 2019. They have also no clue what big money does on a quarterly basis. I suppose this gives new meaning to the saying: Ignorance is Bliss!