My tin foil hat says that Janet Yellen at Treasury was instrumental in the Powell Fed’s policy (and she’s not there anymore)
We all know the Fed is impartial, right? Like, when Trump appoints a lackey interest rate cutter at the first chance he gets, ha ha ha.
But it goes both ways. Of course Trump is going to rig the Fed to try to benefit the economy; his economy (let’s talk about that future inflation problem later). But I believe that the Powell Fed was at least somewhat influenced by then Treasury Secretary (and former Fed chief) Yellen back in 2021 when I was looking and calling for rate hikes and Jerome “he’s always late” Powell just sat there, dovish as the inflation problem grew.
Again I point to H1, 2022 when the Fed finally got off its keister and started to hawk against the inflation it was primary in creating in H1, 2020. My guess is that Powell had a little Yellen in his ear whispering “transitory inflation” all the while before they finally hiked. She was in the media at the time spewing that bullshit. Powell sat and waited until the problem got too big to continue rationalizing away.
If you know me, you know I am not anything near a Trump fan. I think he is a TV show. Dark reality, let’s call it. But I believe to some degree the Fed played politics – played ball – with former Fed chief, current TreasSec Yellen, and waited until it could wait no more before finally springing into action…
This was no 7 year Bernanke ZIRP operation because the bond market would no longer allow it. This was “fuck, we broke something… now we gotta DO something, anything!”
While I think that the Fed is going to pivot dovish imminently (if not this Friday), I am also aware that there is no Biden in White House and more importantly, no Yellen at Treasury. There is only a big loud bully calling Powell names, lobbing insults and threats. What does Powell the sensitive human care if he holds out on explicit rate cut talk for just a bit longer?
This post is inspired by an article headline (I did not read it, as I don’t subscribe to Bloomberg) titled Powell’s Last Stand At Jackson Hole. I can only imagine that the premise may be a firmer than expected Powell on Friday. Just guessing. There could actually be ego, if not dignity involved here, in the face of Trump’s constant and loud insults.
Regardless, CME Group (windsock that it is) currently sees an 85% chance of a rate cut coming next month. So maybe Powell will posture something not quite so dovish, but the rate cuts are very likely coming sooner rather than later.
The U.S. Dollar is still postured to rally again and negate a ‘completed A-B-C bear market rally (prior to new lows)’ scenario. Whatever happens on Friday, USD will probably react one way or the other. So too markets, I would think.
The idea of an independent Fed is a myth, whether they are influenced by whatever political party is in power or the massive U.S. and global banking complex. You think the Fed is for the people? Try my tin foil hat on for size.
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