What’s This Pivot Talk All About?

Concept of supporting economic growth in the economy - What’s This Pivot Talk All About?The stock market and financial pundits hang on every word from Federal Reserve Chairman, Jerome Powell. They attempt to “read between the lines,” looking for clues about what the Fed is going to do next. When are they going to “pivot” and start cutting rates?

With the 2008 bank bailout, the Fed flooded the financial system with free money, effectively reducing interest rates to zero. Individuals, businesses and government got hooked on cheap credit, borrowing and spending like addicts, with no concern for the consequences.

The banks were deemed “too big to fail.” Congress passed the (TARP) Troubled Asset Relief Program, bailing out lenders holding billions in debt that could not be repaid.

The Fed’s balance sheet immediately jumped over $2 trillion, and the Fed continued creating credit out of thin air until their balance sheet topped $9 trillion. Real inflation reached double digits and could no longer be ignored.

When the government couldn’t find lenders willing to accept low rates, the Fed took up the shortfall, creating credit out of thin air with a simple bookkeeping entry.

FRED Chart: Assets: Total Assets: Total Assets (Less Eliminations from Consolidation): Wednesday LevelAs part of the 2008 bailout, The Dodd-Frank bill was passed to protect the public from further harm. Former Labor Secretary Robert Reich, shares some sneaky legislation quickly slipped into a government spending bill:

“Some believe the central political issue of our era is the size of the government. They’re wrong. The central issue is whom the government is for.

…. Consider the new spending bill….

…. It repeals part of the Dodd-Frank Act designed to stop Wall Street from using other peoples’ money to support its gambling addiction….

Dodd-Frank barred banks from using commercial deposits that belong to you and me and other people, and which are insured by the government, to make the kind of risky bets that got the Street into trouble and forced taxpayers to bail it out.

But Dodd-Frank put a crimp on Wall Street’s profits. So the Street’s lobbyists have been pushing to roll it back.

The new legislation, incorporating language drafted by lobbyists for Wall Street’s biggest bank, Citigroup, does just this.

It reopens the casino. This increases the likelihood you and I and other taxpayers will once again be left holding the bag.”

The bailout was opposed by the majority of Americans; clearly the government (and banking system) is working against the will of the majority.

Jeff Thomas explains in his article, “The Bank Was Saved, and the People Were Ruined.”

“The above quote is from William Gouge, commenting on the Panic of 1819. The panic had been caused when the First Bank of the United States first expanded the money supply dramatically by offering loans, then contracted the money supply by tightening its requirements for new loans, causing a crash.

This is a useful quote, as, in its simplicity, it states the very nature of crashes brought on by irresponsible banking practices. In every case in which this occurs, it is possible through the complicity of the government of the day.

The origin of this syndrome goes back to Mayer Rothschild,…who…offered financial benefits to politicians in Germany in trade for political support for whatever activities his bank might practice.

Close-up of woman holding power plug and putting on charge pink piggy bank. Online banking and savings. Energy savings concept…. Rothschild created boom-and-bust cycles which were highly profitable for his bank, but depended upon the support of the government when the “bust” part came along.

This scheme was accurately and succinctly described by G. Edward Griffin in 1994:

‘It is widely believed that panics, boom-and-bust cycles, and depressions are caused by unbridled competition between banks; thus the need for government regulation. The truth is just the opposite. These disruptions in the free market are the result of government prevention of competition by the granting of monopolistic power to the central bank.'”

The Federal Reserve is a private corporation, owned by “member banks” and controlled by the big banks. Jerome Powell is the modern-day version of Rothschild, looking after the best interest of the banks and politicians.

Since 2008 the top five banks share of the nation’s wealth has doubled.

FRED Chart: 5-Bank Asset Concentration for United StatesUnder the guise of helping the public, Powell began raising interest rates to bring inflation under control. Don’t kid yourself, his motivation is to protect the banking/government gravy train. Out-of-control inflation destroys the banking system and eventually the government, (see Argentina) he wants to keep the game going.

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When will he pivot and begin cutting rates?

Former Fed Chairman Paul Volcker, faced with double-digit inflation in the late 1970s, was credited with taking “BOLD” moves, raising interest rates over 20% to bring inflation under control.

This graph outlines the Fed funds rate since the mid-1960s. The grey lines indicate recessions. Note the boom-bust pattern, the fed raises rates, a recession follows, the Fed drops rates and continues the process – for the benefit of the banks and politicians.

Fred Chart: Federal Funds Effective Rate

During the recessionary periods, credit is restricted, and the entire economy suffers; including the banks. They scream for the Fed to “do something”, drop interest rates to stimulate the economy and keep the gravy train moving.

There’s one major difference. Volcker raised rates over 20%, well above the rate of inflation, and held them until inflation was truly brought under control. When Volcker pivoted, he brought interest rates back down to the 5% range, what most considered “normal.”.

From 1990-2000 interest rates hovered within the “normal” range.

  • Savers could hold safe, fixed income investments earning inflation-beating returns.
  • Responsible borrowers could borrow at reasonable rates.
  • Business and commerce were not hampered, or unreasonably influenced, by interest rates.

This time around, the Fed dropped interest rates to nearly zero, negative when considering inflation. Powell began Quantitative Tightening (QT) reducing the amount of debt held by the Fed, while raising interest rates back into the old “normal” range.

MarketWatch asks, Seventh time a charm?

“Here are the other six times the market wrongly thought there’d be a dovish pivot.

Henry Allen, a strategist at Deutsche Bank, cautions that it’s the seventh time this cycle that markets have attempted to make a dovish pivot. The other six, obviously, have been wrong.

A dovish pivot describes a change in interest-rate expectations in favor of less aggressive monetary policy.”

Seventh time a charm? Chart

A recent Wolf Street headline blared, “Our Wall Street Crybabies Want the Fed to Stop QT.” The casino banks are screaming bloody murder, their profits are down and their gravy train is disrupted. Unlike Volcker, a downward Powell pivot would be below “normal” igniting the cheap, high-risk credit cycle once again; benefitting the elite at the expense of “the people.” Rothschild would be so proud!

When To File For Social Security Special Report – Click Here!Friend, and expert Chuck Butler tells us:

“I feel the pundits/stock jockeys are telling their clients that the bear market in stocks has ended; the next move for interest rates will be down, expecting a stock rally…

Personally, I feel any current stock market rally is a bear market rally, and nothing more….

The Fed/Cabal/Cartel isn’t going to be cutting rates any time soon. All the historical indicators we’ve used to tell when a recession is coming, are flashing red…which means…stocks have not done well in past recessions….”

It’s not surprising the banks and stock jockeys are calling for a pivot. For the last 14 years interest rates were so low, investors, looking for some sort of inflation-beating yield had no place to go but the stock market. Trillions of dollars went from fixed-income investments into the brokerage arm of the big brokerage/casino banks. They funneled much of the money into their income-producing products, made record profits, and rewarded themselves with handsome bonuses and stock options.

Last spring The Motley Fool reported over $500 billion moved from the banking system into money markets and short-term treasuries, reversing the trend that began in 2008. With further rate increases, I’m sure the pace is accelerating.

Investors are better served by holding safe, inflation-beating fixed-income investments, with a portion of their net worth invested in the stock market and other inflation-beating assets.

The casino banks are screaming, they want it all.

BS Alert SymbolDeutsche Bank’s Henry Allen pointed to world economic events which would cause the Fed to pivot. I call BS – those events merely provide the excuse for the Fed to reopen the casino banks gravy train.

Wall Street On Parade, reports:

“Last year 12,000 Lobbyists Were Whispering in the Ear of Congress with a Bankroll of $4.1 Billion; Five Senators Are Demanding Transparency.

…. The five Senators explain the real cost of this lobbying as follows:

‘In 2022, total federal lobbying expenditures reached $4.1 billion…to influence decision-making in Congress and across government agencies, while the U.S. Chamber of Commerce – which counts companies like JPMorgan Chase, Alphabet, and Chevron among its members – spent $79.4 million.'”

Our recent article, The “Culture Of Corruption” Is Historic, illustrates how the monopolization of banking power benefits the elite – at the expense of “the people”.

Powell paused on rate increases, but he’s not clearly stated the Fed has no intention of lowering them – (EVER!) while keeping them at historic norms.

Any pivot will likely be timed with an election cycle, with a BS excuse. Inflation will get ugly; the banks will be saved and the people will be ruined once again.

I agree with Chuck, don’t get fooled with a bear market rally; hold on to your gold!

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On The Lighter Side

The weather has turned pleasant here in Arizona and we have had the doors wide open enjoying the fresh air from time to time.

American football player emoticon with ballThe college football Gods have spoken and picked their final four to compete for the national championship. Who’s #1? Undefeated Florida State and reigning champion Georgia did not make the cut and are crying foul. I can’t blame them. The top six teams could make a good, logical case to make the cut, and no matter what two were left out, they would be screaming.

Any attempt to fix the system wouldn’t work. NCAA basketball has a 64-team seed and those left out scream bloody murder.

Regardless, for the next month football junkies will have plenty of college football bowl games to provide entertainment.

In the meantime, I am doing my daily trips to the cancer center for radiation treatment and all is going well. The side effects are fatigue, naps are my friend. Compared to many dealing with cancer, I consider myself doggone lucky.

There won’t be any article next week and I’ve just put the finishing touches on my year end mentoring article – so Jo and I are going to take some time off for the holidays.

I hope everyone has a wonderful Christmas, one to remember for generations.

Quote (s) of the Week…

Illustration of santa driving the sleigh and his reindeer through the night“May you never be too grown up to search the skies on Christmas Eve.” — Anonymous

“Best of all are the decorations the grandchildren have made — fat little stars and rather crooked Santas, shaped out of dough and baked in the oven.” — Gladys Bagg Taber

And Finally…

I found some cool Christmas humor for our enjoyment:

  • I was Christmas shopping and ran into a guy on the street. I noticed his watch and said that it runs slow. He said, ‘So does the guy I stole it from. — David Letterman
  • Let’s be naughty and save Santa the trip. — Gary Allan
  • I’ve learned that you can tell a lot about a person by the way he handles these three things: a rainy day, lost luggage, and tangled Christmas tree lights. — Maya Angelou
  • The main reason Santa is so jolly because he knows where all the bad girls live. — George Carlin
  • There are three stages of man: he believes in Santa Claus; he does not believe in Santa Claus; he is Santa Claus. — Bob Phillips
  • I stopped believing in Santa Claus when I was six. Mother took me to see him in a department store, and he asked for my autograph. — Shirley Temple
  • It’s Christmas Eve! It’s the one night of the year when we all act a little nicer, we smile a little easier, we cheer a little more. For a couple of hours out of the whole year, we are the people that we always hoped we would be. — Bill Murray
  • I wish we could put some of our Christmas spirit in jars and open one up every month. — Unknown

And my favorite…

  • Christmas is a time when you get homesick, even if you’re home. — Carol Nelson

Until next time…

Dennis Miller

“Economic independence is the foundation of the only sort of freedom worth a damn.” – H. L. Mencken

 

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3 comments

  • David Richardson

    “When will he pivot and begin cutting rates?”

    Here’s another real expert’s opinion:

    [Link deleted]

    • Dennis Miller

      HI,

      I am not aware of what you are talking about with the “link deleted” comment. I know the WSJ is a paid service, perhaps they are doing it. I will try to find the article, thank you.
      Best regards,
      Dennis

  • David Richardson

    It says “link deleted”. If you are going to do that there is no point trying to send you an article; this will be the last time. But since I’ve gone this far, look up:

    “Inflation is ‘permanent’ and you’ll never regain your lost purchasing power, says a Wall Street guru”. Article from Business Insider

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