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The Fed has made an important change in its narrative

Cory
October 17, 2016

With Chris Temple today we discuss the changing narrative of the Fed outlined through recent comments by Janet Yellen. On Friday Yellen discussed the possibility of letting inflation get ahead of the central bank. We address if the Fed even has the ability of spurring inflation and what investors need to be aware of if they are successful.

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Discussion
40 Comments
    Oct 17, 2016 17:56 AM

    The infrastructure spending is a canard. Please see

    Stop Bleating About Crumbling Infrastructure
    http://davidstockmanscontracorner.com/stop-bleating-about-crumbling-infrastructure/

    Then stop spreading this canard.

    A country nearly $20 trillion in debt can’t afford to spend trillions more on infrastructure pork barrel. (Not that it ever could.)

      Oct 17, 2016 17:31 AM

      Right on E. Here is another Big Lie: the Fed wants to help. The Fed was conceived in sin. It has always been a creation of, by, and for history’s biggest thieves. Printing money is systematic, institutionalized stealing which can NEVER be good for the economy. All real growth has happened in spite of the Fed. Why can’t fundamentalists grasp this very simple point? Why do we even listen to the Fed? They can’t possibly have anything worth listening to.

        Oct 17, 2016 17:37 PM

        Wayne, “he who has the gold rules!” Or, how about in this case, “he who can create the gold rules!”

      Oct 17, 2016 17:38 AM

      It’s not a question of what the country can “afford.” That hasn’t changed since the first of the $20 trillion of debt. The point is what more games do the Fed and its enablers need to play to justify their continued existence and that of their fractional reserve system. I for one do not agree with this whole mess; simply reporting the reality as it now exists.

      Oct 17, 2016 17:34 PM

      I would suggest that spending on infrastructure makes a lot more sense than what has been done in the past.

        DC
        Oct 17, 2016 17:05 PM

        Agreed. It will give jobs to people who are currently out of work and on gov’t programs.
        Working people add to the tax roll.
        Working people have at least a little money to spend as a consumer.
        Working people are off gov’t programs.
        Working people feel better about themselves which has its own pluses both individually and for society.
        And, meanwhile, the infrastructure of this country improves.
        I don’t see a downside — unless a certain criminal gets into office and raises taxes with the pretense of using it for infrastructure, which will reverse everything I just said above.

          Oct 17, 2016 17:38 PM

          Government workers do not add to the tax roll. They do not pay taxes at all, they take taxes.
          Few do see a downside because they do not understand economics. Keynesian economics is a fraud designed to provide “ivory tower” cover for the scam that is socialism.

            Oct 17, 2016 17:54 PM

            NO Matthew, actually federal employees do pay taxes. Where did you get that anyway?

            Oct 17, 2016 17:02 PM

            NO Al, they do not. They merely give back a portion of the taxes that were used to pay them with in the first place.

          Oct 17, 2016 17:06 PM

          Probably true, DC!

        Oct 17, 2016 17:13 PM

        So instead of letting people spend their own money on what is important to them a bunch of bureaucrats in Washington can do a better job of allocating valuable resources? Do I have that right? I mean they are out for our interests, right?

        Find anywhere in the Constitution where the government is responsible for jobs. Free markets produce jobs, not socialists in Washington.

          Oct 17, 2016 17:34 PM

          You couldn’t be more right but hopefully Al meant that spending on infrastructure is better than spending on wars or bailouts.

            Oct 17, 2016 17:00 PM

            Of course and thank you Matthew. When you look at the directions today, infrastructure spending is the obvious better choice.

            Oct 17, 2016 17:04 PM

            Yes, of course, and contrary to popular belief (programming), war is NOT good for the economy.

            Oct 17, 2016 17:28 PM

            Matthew:

            True but totally meaningless. We have been conditioned to think that government is always the solution and our forefathers believed government was the cause of the problems. Saying spending money on infrastructure is better than was is about as meaningful as saying cancer is better than being shot.

            Governments don’t ever do a very good job of allocating resources, people do.

            Oct 17, 2016 17:33 PM

            Yes, I get your point. The destructive economics and socialist structure is the same either way – different paths to the same destination.

          Oct 17, 2016 17:02 PM

          +1 Bob M. These bureaucrats are meddling in areas that was never intended for them to be involved in. The “invisible hand” of free markets that Adam Smith discussed has done the job all this time until this government has decided it is their job to maintain the McJobs and that their metrics are the best measurement of the health of the economy. It’s a load of rubbish….

          ________________________________________________________________________

          America’s quiet catastrophe: The collapse of work for men
          By Nicholas Eberstadt Published October 17, 2016

          “If we look just at men of “prime working age”—the critical group between the ages of 25 and 55—work rates in 2015 were two percentage points lower than they were in 1940.”

          “In fact, if work rates for men were only as high today as in 1965—a time when we enjoyed true “full employment”—nearly 10 million more men would have paying jobs today. Think of the difference that would make to our country.”

          “Washington’s unemployment numbers are supposed to gauge the health of our labor markets, but they cannot help but mislead. They were devised in a bygone era when there were only two alternatives for an able bodied man: 1) to work, or 2) to be looking for work if you are not employed….”

          http://www.foxnews.com/opinion/2016/10/17/americas-quiet-catastrophe-collapse-work-for-men.html

            Oct 17, 2016 17:32 PM

            Excelsior:

            Good for you. Someone understands what the US was founded on. I hate to ever disagree with Matthew because he and you are a breath of fresh air in your contributions to the site.

            Governments should never be in the business of creating work programs.

            Al, are you serious? You think government is responsible for creating jobs. I do hope you are jesting. Governments should create a healthy environment for individuals to succeed. A free market is where individuals get to spend their own money and government plays a small but vital role in maintaining a level playing field.

            Oct 17, 2016 17:41 PM

            Robert, I’m glad you did disagree with me. You took it deeper and and made a much-needed point.

            Oct 17, 2016 17:03 PM

            Great points Bob M. The government’s job is some infrastructure, defense of the national borders, and creating an environment that is fair and who’s laws apply to all citizens. It is not the Government’s place to be in charge of creating jobs or foisting minimum wages on businesses out of left field, or telling people how to live.

            Government should be unnoticed and honestly not part of the majority of daily life or the business world. It is shocking and disappointing that people so willingly have given over their liberties and free choice, and asked for government to take over and become big momma.

          Oct 17, 2016 17:05 PM

          Really Robert, I thought it was the responsibility of the government. And, by the way, what is a free market? Does that mean that I and you do not have to pay to use it?

            Oct 17, 2016 17:28 PM

            Pay to use it, Al? Are you suggesting that someone owns “the free market” and should be paid for allowing access to it? Do you think of yourself as having owners?

            Those who are willing to work, risk their capital and, potentially, bring prosperity in the process, should not be punished with taxes (unless, of course, the goal is less prosperity for society and more dependence on the government).

            In a sane world, any tribute would flow the other way, if at all – from the people to the providers of prosperity not to the destroyers of prosperity who take it by force.

            Oct 17, 2016 17:31 PM

            Well said Matthew.

            Oct 17, 2016 17:33 PM

            Matthew: +1

            I thought you got it.

          Oct 17, 2016 17:10 PM

          Theoretically I suppose, but then again these are not theoretical times are they Robert.

          Agree with you on a lot of things, as you know, but I cannot agree on the subject of improving U.S. infrastructure as opposed to the direction where the spending is currently going.

            Oct 17, 2016 17:37 PM

            Al:

            When you are dead broke, trying to figure out how to spend money wisely that you don’t have anyway doesn’t make any sense at all. You are comparing apples to oranges but you are in the auto repair section of a hardware store.

            We are bankrupt and there is no way to spend wisely.

          Oct 17, 2016 17:31 PM

          We have been conditioned to think that government is always the solution

          True and it has gotten to the point where to many government is a religion. The sheeple view government as their lord and savior.

    CFS
    Oct 17, 2016 17:15 AM

    Interest rates may go up a quarter of a percent, but WHO CARES?
    They cannot go up much. The treasury will continue to monetize, regardless of what the Fed does. So who, in their right mind cares what the Fed does? It has become irrelevant. If it raises interest, it is only to save face.
    The only long-term solution is cut government spending, cut taxation.
    Perhaps taxation will be cut by Trump, but no politician will cut government spending until it is forced……either by revolution or collapse. If there is no revolution, look for decades of stagflation, collapse of empire, etc.

    Why are they waiting so long?
    Corrupt professional political class that care more about being reelected than country.
    We need term limits, and a Convention of the States to limit taxation to a max of about 15% of GDP.

      Oct 17, 2016 17:45 PM

      Now CFS, most of that is certainly true.

      I do; however, also have to blame the populace for playing along with this for such a long time. Just look at the personal debt levels of our very recent history. Look at the individual greed that existed during the housing bubble. Kathy and I did not play that game and now we are okay. Look at the zero down auto loans and the stupid consumers actions that resulted from that.

      I will say and this will probably sound like a contradiction. We just brought Kathy a late modes Audi Q5. The sticker was $24K and as I was getting reading to write a check my friend said, “why do you want to do that. Your total interest if you simply pay $10K is a whopping $1250 for the life of the deal. He is right. I guarantee that I can do better in our business by intelligently investing the $14K and so could you!

      It is a complete house of cards, my friend!

    Oct 17, 2016 17:28 AM

    It is altogether too easy to foresee a time of reckoning ahead, The Fed can fiddle, faddle, muddle, duddle, with inflation or deflation; it doesn’t matter The Empire is burning. DT

      Oct 17, 2016 17:00 PM

      Agreed DT. It’s the fiddling, faddling, muddling, and duddling that concerns me…..

    CFS
    Oct 17, 2016 17:28 AM

    Hate to tell you, Big Al, but infrastructure spending, hand-outs or other ways of injecting money into the economy, are ONLY temporary, stop-gap measures.

    Look at Japan!

    I’m not an economist, but I believe I am well-educated and well-read plus I have a few working brain cells left, and EVERYTHING I have read on real economic theory, and functioning of multi-faceted dynamic models, tells me that the problem is government drag = over-spending.
    A car does not go well with a foot permanently on the brake,
    A ship does not go well through ice-pack,
    An economy goes not perform well if governments siphon off most of the profits.
    It is as simple as that.

      GH
      Oct 17, 2016 17:42 PM

      Government drag/overspending, yes. But also widespread corruption and criminality with impunity.

        Oct 17, 2016 17:09 PM

        I’ve never really gotten over the complete inefficiency in government spending:

        $37 screws, a $7,622 coffee maker, $640 toilet seats; : suppliers to our military just won’t be oversold
        July 30, 1986|JACK SMITH

        http://articles.latimes.com/1986-07-30/news/vw-18804_1_nut

          Oct 17, 2016 17:12 PM

          I would have to say, Excelsior, that probably none of us have gotten over this inefficiency.

            Oct 17, 2016 17:16 PM

            Look at the US Post office versus UPS/FedEX/DHL.

            I’ll pick the private industry and free marketplace that competes and innovates every single time over the fat cat politicians and government twits that simply gorge on larger sums of tax money, keep increasing the debt ceiling, and run up deficits that can never be paid back. What was the definition of insanity again??

            Oct 17, 2016 17:48 PM

            The government should never have bailed out businesses, auto makers, insurance companies, and bankers. Nobody is too big to fail. The marketplace rewards innovation, competition, and good practices, and punished failure. When the government gets involved to prop up failed experiments and poorly run businesses, then it throws a wrench in the gears of the free market. Yes it would have been a tough time for some people, but what they’ve done by keeping the economy on life-support and by injecting money to the addicts, is they’ve set up a problem of much more epic proportions. I’m not sure what it’s going to look like in this game of musical chairs when the music stops, but it is going to be far more painful.

    Oct 17, 2016 17:47 PM

    How can you possibly have any brain cells given the fact that you live in the heart of the Sonoma Valley!

    Oct 17, 2016 17:52 PM

    Get a job with the government Big Al, you won’t like to see how they destroy incentive by rewarding people who do nothing year in and year out. DT