The True Believer

How is it that seemingly intelligent people, of apparent sound mind and rational thought, can stray so far off the beam?  How come there are certain professions that reward their practitioners for their failures? The central banking and monetary policy vocation rings the bell on both accounts.  Today we offer a brief case study in this regard.

 

Minneapolis Fed president Neel Kashkari attacking a block of wood with great zeal. [PT]

Photo credit: Linda Davidson / The Washington Post

 

Minneapolis Federal Reserve President Neel Kashkari is a man with strong convictions.  He is what the late Eric Hoffer would have classified as “the true believer.”  According to Hoffer:

 

“It is the true believer’s ability to ‘shut his eyes and stop his ears’ to facts that do not deserve to be either seen or heard which is the source of his unequaled fortitude and constancy.  He cannot be frightened by danger nor disheartened by obstacle nor baffled by contradictions because he denies their existence.”

 

For starters, Kashkari believes the Federal Reserve, an unelected board of bureaucrats, can crunch economic data into pie graphs and bar charts and draw conclusions as to what they should fix the price of credit at.  Moreover, he believes that by fixing credit at the “correct” price, the Fed can somehow “optimize” the economy.

This idea is patently false.  Remember, the economy is comprised of billions of people with ever changing interactions.  Activities and exchanges are always adapting.

What may be the correct price of credit at one time is precisely the wrong price of credit at another.  Only a free market for credit, where rates are agreed to by willing borrowers and lenders, and unobstructed by government decree, can self-correct in real time to properly meet changing supply and demand.

 

Well Considered Conclusions

But even if it were true that economic data could be used by the Fed to properly fix the price of credit, there is an even greater leap of faith that Kashkari takes with unequaled fortitude.  Specifically, Kashkari wholeheartedly accepts data contrived by federal bureaucrats as if it were the gospel truth.

 

“Inflation breakeven rates” are an attempt to measure the inflation expectations of market participants by comparing two sets of market-derived bond yields (see explanation in the annotation above). As you can see, the market tends to change its mind frequently, and occasionally to a very large extent. As we point out in the annotation, the idea that it is “bad” for the economy if the central bank fails to constantly debase the money it issues has no basis in fact. No other shibboleth held as sacrosanct by the central planners is as utterly bereft of theoretical and empirical evidence as this one. One could essentially call the Fed a faith-based printing company. [PT] – click to enlarge.

 

These fabricated abstractions are what Kashkari and his cohorts use as the basis for fixing the price of credit to their liking. No doubt, the methodology of using economic data to identify apparent aggregate demand insufficiencies and perceived supply gluts is flawed.

Unemployment.  Gross domestic product.  Price inflation.  These data points are all fabricated and fudged by people with their own biases and prejudices. For each headline number, there are a list of footnotes and qualifiers.  Hedonic price adjustments.  Price deflators.  Seasonal adjustments.  Discouraged worker disappearances.  These subjective adjustments greatly affect the results.  So, what good are they?

 

GDP and CPI, y/y change rates. Apart from the fact that the methodologies used to compile these data are questionable and not entirely free of political considerations, many of the things they purport to “measure” are actually not measurable; and to the extent that the data are measurable, they only have value to economic historians and to those who wish to meddle in the economy. Bureaucratic meddling in the economy is apodictically certain to worsen its performance, but it usually does create short term advantages for select interest groups. [PT] – click to enlarge.

 

On Monday, in an article titled, My Take on Inflation, Kashkari demonstrated his full faith and convictions in government data – and the Fed’s ability to use it to pilot the economy.  We won’t waste your time with his many rambling explanations.  But in the spirit of observing a lost man navigating through the wilderness using butterflies as reference markers, we offer Kashkari’s well considered conclusion:

 

“If I am correct that the Fed’s own actions are an important factor driving surprisingly low inflation and falling inflation expectations, the implication is that our policy should focus on supporting inflation to ensure that we are on track to return to our 2 percent target.  My preference would be not to raise rates again until we actually hit 2 percent core PCE inflation on a 12-month basis, unless we have seen a large drop in the headline unemployment rate signaling that we have used up remaining labor market slack, or a surprise increase in inflation expectations.”

 

Do you follow the logic?  If not, consider it confirmation that your brain hasn’t been turned to mush by what passes today as learned economic thought.

 

Federal Reserve President Kashkari’s Masterful Distractions

Indeed, these are the words of the true believer.  There is no consideration that the data might be garbage.  Kashkari likely never considered the possibility.  Instead, he goes about his dubious profession with the certainty of a carpenter hanging kitchen cabinets.  But unlike the carpenter, Kashkari doesn’t need to measure twice as to cut once.  He operates with unmatched precision.

Kashkari, without question, is a true believer in extreme economic intervention.  If you recall, as federal bailout chief, he functioned as the highly visible hand of the market.  In early 2009, he arrived at work each day with a smile and went about the business of rapidly dispersing Henry Paulson’s $700 billion of TARP funds to the government’s preferred corporations.  He did so under the pretense that he was destroying capitalism to save it.

Yet it is questionable work experience like this that allows a person to rise to the level of a Federal Reserve President.  Moreover, if Kashkari continues his zealous dedication to his craft, there is no reason he cannot ascend to Fed Chairman or Managing Director of the International Monetary Fund.  In fact, Jeffrey Gundlach believes Kashkari will be the next Chairman of the Federal Reserve.

The point is, Kashkari and his cohorts have aided and abetted the growth in public and private debt well beyond their serviceable limits.  They have debased the dollar to less than 5 percent of its former value and propagated bubbles and busts in real estate, stock markets, emerging markets, mining, oil and gas, and just about every other market there is.  At the same time, they’ve been remarkably successful at enriching private bankers.

 

They don’t dare call it a bubble… establishment rag “The Economist” notices that asset prices might be a tad elevated. Gee, we wonder how that happened! Could it be all that money printing? [PT]

 

Hence, the true believers that keep the charade going via pseudo academic distractions about inflation targets, headline unemployment, labor market slack, supply gluts and other aggregated nonsense, are promoted for running interference.  When it comes to being a tool for the big banks, Kashkari’s distractions are masterful.

 

Dulling the dollar – this Federal Reserve policy-induced vanishing act has gravely retarded economic growth and technological progress, enriched the already rich at the expense of the poor, and corroded the moral fabric of society. It is the reciprocal of the bubbles mentioned above. Call it a symptom of insidious plunder. We have no idea what’s supposed to be good about that. [PT] – click to enlarge.

 

Charts by: St. Louis Fed

 

Chart annotations and image captions by PT

 

Link to original: http://economicprism.com/federal-reserve-president-kashkaris-masterful-distractions/

 

MN Gordon is President and Founder of Direct Expressions LLC, an independent publishing company. He is the Editorial Director and Publisher of the Economic Prism – an E-Newsletter that tries to bring clarity to the muddy waters of economic policy and discusses interesting investment opportunities.

 

 
 

 
 

Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.

   

Bitcoin address: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke

   
 

One Response to “Federal Reserve President Kashkari’s Masterful Distractions”

  • Hans:

    Actually, I was there when dat photo was taken, doing yard work
    for the President.

    It can not be seem, however, he was smashing a set of china,
    with all the previous pictures of past fed chairman (woman).

    Between swings he could be heard muttering, “what about me”
    “it should have been me.”

    America’s slow rot started after the turn of the twentieth century
    and the ramifications of the 1913 Federal Reserve Act only help
    to facilitate it.

    Just as 7% of the populous identified chocolate milk coming from
    CHOCOLATE COWS, so to would only 7% of Americans be able to
    describe even a single function of the Reserve.

    Most Americans would define the money supply as their weekly
    payroll check. Why when asked, most worker bees could not even
    correctly answer their second or first highest cost of living !!

    The changes have been so pronounced in the past half a century, that
    us old timers never needed 8 years of Barrocko’s rope-per-doper.

    The FRB, in all of it’s magnificats stupidity, is playing no small role
    in the collapse and destruction of this Greatest of Great Nations.

    The Rome Empire waffies many times but always managed to
    stabilize itself; until one day, History decided it had one too many waffies.

    In the final analysis, there is a nexus between the Shriner’s Circus,
    All-Star Wrestling and the Federal Reserve. (aka Sachs Reserve)

    Unfortunately, this institution is emblematic of the litany of problems
    facing this sharply divided nation. Our enemies are saying, just
    leave them to their own devices and we will be welcomed with open
    arms.

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • The Biggest Stock Market Crashes Tend to Happen in October
      October is the Most Dangerous Month The prospect of steep market declines worries investors – and the month of October has a particularly bad reputation in this respect.   Bad juju month: Statistically, October is actually not the worst month on average – but it is home to several of history's most memorable crashes, including the largest ever one-day decline on Wall Street. A few things worth noting about 1987: 1. the crash did not presage a recession. 2. its...
  • Canada: Risks of a Parliamentary Democracy
      A Vulnerable System Parliamentary democracy is vulnerable to the extremely dangerous possibility that someone with very little voter support can rise to the top layer of government. All one apparently has to do is to be enough of a populist to get elected by ghetto dwellers.   Economist and philosopher Hans-Hermann Hoppe dissects democracy in his book Democracy, the God that Failed, which shines a light on the system's grave deficiencies with respect to guarding liberty. As...
  • Federal Reserve President Kashkari’s Masterful Distractions
      The True Believer How is it that seemingly intelligent people, of apparent sound mind and rational thought, can stray so far off the beam?  How come there are certain professions that reward their practitioners for their failures? The central banking and monetary policy vocation rings the bell on both accounts.  Today we offer a brief case study in this regard.   Minneapolis Fed president Neel Kashkari attacking a block of wood with great zeal. [PT] Photo credit: Linda Davidson...
  • Thoughtful Disagreement with Ted Butler
      Too Big to Fail?   Dear Mr. Butler, in your article of 2 October, entitled Thoughtful Disagreement, you say:   “Someone will come up with the thoughtful disagreement that makes the body of my premise invalid or the price of silver will validate the premise by exploding.”   Ted Butler – we first became aware of Mr. Butler in 1998, and as far as we know, he has been making the bullish case for silver ever since. Back in the late 90s this was actually a...
  • Donald Trump: Warmonger-in-Chief
      Cryptic Pronouncements If a world conflagration, God forbid, should break out during the Trump Administration, its genesis will not be too hard to discover: the thin-skinned, immature, shallow, doofus who currently resides in the Oval Office!   The commander-in-chief - a potential source of radiation?   This past week, the Donald has continued his bellicose talk with both veiled and explicit threats against purported American adversaries throughout the world.  In...
  • The Donald Can’t Stop It
      Divine Powers The Dow’s march onward and upward toward 30,000 continues without a pause.  New all-time highs are notched practically every day.  Despite Thursday’s 31-point pullback, the Dow is up over 15.5 percent year-to-date.  What a remarkable time to be alive.   The DJIA keeps surging... but it is running on fumes (US money supply growth is disappearing rapidly). The president loves this and has decided to “own” the market by gushing about its record run. During...
  • Precious Metals Supply and Demand Report
      Fat-Boy Waves The prices of the metals dropped $17 and $0.35, and the gold-silver ratio rose to 77.  A look at the chart of either metal shows that a downtrend in prices (i.e. uptrend in the dollar) that began in mid-April reversed in mid-July. Then the prices began rising (i.e. dollar began falling). But that move ended September 8.   Stars of the most popular global market sitcoms, widely suspected of being “gold wave-makers”. From left to right: Auntie Janet...
  • 1987, 1997, 2007... Just How Crash-Prone are Years Ending in 7?
      Bad Reputation Years ending in 7, such as the current year 2017, have a bad reputation among stock market participants. Large price declines tend to occur quite frequently in these years.   Sliding down the steep slope of the cursed year. [PT]   Just think of 1987, the year in which the largest one-day decline in the US stock market in history took place:  the Dow Jones Industrial Average plunged by 22.61 percent in a single trading day. Or recall the year 2007,...
  • On the Marc Faber Controversy
      Il n'y a rien à défendre - by Vidocq   Dr. Marc Faber, author of the Gloom, Boom and Doom Report Photo credit: Michael Wildi / RDB     Il n'y a rien à défendre - There is nothing to defend Personne n'a lu ce qui a été écrit. - Nobody read what was written. Personne n'a pensé avant d'agir, comme la plupart des gens de nos jours. - No one thought before acting, like most people nowadays. L'homme que tu pends est l'homme que tu as fait, pas l'homme que...
  • Stocks Up and Yields Down – Precious Metals Supply & Demand
      Where the Good Things Go Many gold bugs make an implicit assumption. Gold is good, therefore it will go up. This is tempting but wrong (ignoring that gold does not go anywhere, it’s the dollar that goes down). One error is in thinking that now you have discovered a truth, everyone else will see it quickly. And there is a subtler error. The error is to think good things must go up. Sometimes they do, but why?   Since putting in a secular low at the turn of the millennium,...
  • The 2017 Incrementum Gold Chart Book
      A Big Reference Chart Collection Our friends at Incrementum have created a special treat for gold aficionados, based on the 2017 “In Gold We Trust Report”. Not everybody has the time to read a 160 page report, even if it would be quite worthwhile to do so. As we always mention when it is published, it is a highly useful reference work, even if one doesn't get around to reading all of it (and selective reading is always possible, aided by the table of contents at the...
  • Tales From a Late Stage Bull Market
      Pro-Growth Occurrences An endearing quality of a late stage bull market is that it expands the universe of what’s possible.  Somehow, rising stock prices make the impossible, possible.  They also push the limits of the normal into the paranormal.   This happens almost every time Bigfoot is in front of a camera. [PT] Cartoon by Gary Larson   Last week, for instance, there was a Bigfoot sighting near Avocado Lake in Fresno County, California.  But it wasn’t just...

Support Acting Man

Top10BestPro
j9TJzzN

Austrian Theory and Investment

Archive

350x200

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com