From head of research for Richard Fisher at the Dallas Fed comes Danielle DiMartino Booth’s book Fed Up to explain why the FED is bad for America and why the Fed is acting against the interests of ordinary Americans to favor the institutions. Much more is involved in this book form 2008 to current day but interest rate rises is key focus today.
To the unanswered question to why the Fed seeks aggressive interest rate raises, DiMartino answered in yesterday’s interview is to engineer a recession under Trump’s term. An extraordinary statement yet raise rates under easy money policies is actually the result to see recession based on years of past economic prescriptions.
Easy money and accomodative policies is defined by Fed’s holdings in the SOMA Account which currently contains in all securities $4, 237, 041, 281.00, the highest total in SOMA account history. The current total fails to speak to one raise let alone multiple especially when weekly changes barely sees $10 billion. The second Di Martino answer to interest rate raises is the threat to the establishment in Trump tax cuts as slashes would unleash full economic power to the masses and threaten Fed market controls. The laugh to this statement is to consider the Fed ahead of any curve since its 1913 establishment.
Why Trump as the target is because he seeks to take down the entire Washington establishment whose sole purpose since 1988 was grow government to grow wealth for those in the establishment. Democrats are as guilty as Republicans because the 1988 election of George H.W Bush saw a transfer of power from Taft to Roosevelt Republicans. The difference between Roosevelt Republicans and Democrats is minimal, particularly when tax cuts failed to enter the lexicon since 1988. The result was government growth at the expense of the masses in the private sector.
George H.W Bush’s economy in 1992 was 1.2 trillion. Today, its speculated + 2 trillion. Why speculation is because America’s Bummer never submitted a formal budget for Congressional hearings and approval and instead worked on Continuing Resolutions. Obummer asked for phantom budget numbers and Congress approved. Trump submitted a formal budget for the first time in many years at around 2.5 trillion.
The other question to raises is exchange rate related. Fed Fund raises saw DXY from December climb 300 pips from 99 to 102’s. Rarely does the Fed mention dollar policy in statements but last May? was revealed the Fed’s desire for a lower DXY. Raise Fed Funds and opposite effects will be seen. What Tax cuts mean for the masses under a higher DXY is the current unanswered question.
Under lower Inflation, the difference maybe minimal. The Fed nor any central bank doesn’t need an interest rate change to engineer an exchange rate level. The ECB mastered that concept last June and all central banks jumped on board. Its actually far better to not change interest rates so to leave exchange rates inside small channels for extended periods.
Politics, philosophy and party labels aside, we’re beginning to see years of the effects of Obummer’s economic destruction and America at its weakest levels as the direct cause. Not a word was spoken in 8 years of America’s Bummer yet today everybody speaks. To regain America;s strong posture again will take years as tax cuts is just the start.
The recommendation is follow Dimartino as she’s not afraid to speak her mind and reveals insightful information.
EUR/USD Bottom points at lower 1.1100’s is now 1.1117 and rising. caution at 1.1199 and 1.1227 .
GBP/USD below breaks at 1.2631 and 1.2620 needed to see lower while above 1.2667 and 1.2698 to see 1.2707 an 1.2757.
AUD/USD below 0.7535 and 0.7529 musty break for lower levels.
Brian Twomey
BRIAN TWOMEY ON TRADING 