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What is the Federal Reserve Hiding From Us?

What is the Federal Reserve Hiding From Us?

"The most inappropriate monetary policy that I’ve seen maybe in my lifetime."- Paul Tudor Jones on the Federal Reserve via CNBC

The Federal Reserve has three mandates per their Congressional charter. They…

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What is the Federal Reserve Hiding From Us?

The most inappropriate monetary policy that I’ve seen maybe in my lifetime.”- Paul Tudor Jones on the Federal Reserve via CNBC

The Federal Reserve has three mandates per their Congressional charter. They are to effectively promote maximum employment, stable prices, and moderate long-term interest rates. The Fed has met the first goal, employment is largely maximized. As far as the other two, the Fed is running monetary policy consistent with destabilizing prices and doing it with interest rates that are well below moderate.

Why are they employing the “most inappropriate monetary policy” that famed investor Paul Tudor Jones has seen in his lifetime? Maybe the better question is, is such an aggressive policy, which purposely goes against their mandate, hiding something?

Fed Mandate Scorecard

To provide context to the questions, let’s review the three Fed mandates and compare their current standing to the past.

Maximum Employment

The unemployment rate is slightly above the average of the five years leading to the pandemic but over 1% below the longer-term average. The two alternative employment measures, which factor in job openings and those willingly quitting jobs, show the adjusted unemployment rate is well below the 20-year average.

Traditional measures of employment are essentially fully recovered from the pandemic. Alternative measures, such as those above, tell us the labor market is healthier than almost any time in the last 20 years.

Stable Prices

Inflation measured by CPI and the Fed’s preferred method, PCE, runs two to three times the rate of the last five and twenty years. Five-year market-implied inflation expectations are up to 2.90%, about twice that of the previous ten years. Consumer inflation expectations, measured by the University of Michigan, are nearing 5%, also twice that of the last ten years.

Prices are far from stable. All measures of inflation are running hot and showing signs they may be more persistent than the Fed’s verbiage “transitory” would have us believe. Even Jerome Powell is finally admitting as such. Per a recent speech, he had this to say in regards to inflationary pressures: “have been larger and longer-lasting than anticipated,”

Moderate Long Term Interest Rates

Interest rates for just about everything is well below average. The Fed still has the Fed Funds rate pinned near zero with no intentions of raising it anytime soon. Corporate yields and mortgage rates are also at or near record lows.

With the Fed seemingly ignoring its three congressional mandates, we look at the amount of monetary stimulus the Fed is applying to the system.

Measuring the Extremeness of Monetary Stimulus

The Fed conducts monetary policy via manipulating the Fed Funds rate. In 2008, when the rate hit zero, the Fed wanted to do more. Unwilling to lower rates below zero, they introduced quantitative easing or QE. QE effectively lowers rates by buying Treasury and mortgage securities. The reduction of supply leads to higher prices and, therefore, lower interest rates and yields.

Fed Funds

Before 2008 we could measure how aggressive monetary policy was by comparing Fed Funds to measures of economic growth. The graphs below, for instance, compare nominal GDP growth and CPI with Fed Funds.

In the top graph, the Fed has kept Fed Funds well below the economic growth rate over virtually the entire period since the Financial Crisis. The second graph shows they have held the real Fed Funds rate (inflation-adjusted) negative since 2008.

As shown, the Fed is increasingly using more stimulative rates of Fed Funds.  This latest dose of stimulus is even more excessive than prior ones when compared to economic conditions.

QE

Since the birth of QE, the graphs above do not paint a complete picture of monetary policy. To do that, we must factor in QE and the effect it has on interest rates.

Ex Fed Chairman, Ben Bernanke, estimates every additional $6-10bn of excess reserves held by banks (a byproduct of QE) is roughly equivalent to lowering interest rates one basis point.

The “Bernanke adjustment” to Fed Funds results in the effective level of Fed Funds being 5% below the current level. To repeat, Fed Funds are effectively at -5%.

Looking back at the last ten years, Fed Funds were effectively 2.00 to 2.50% lower than the stated rate.

We can do a similar analysis using an alternative model which the Fed tracks closely. 

Per the University of Chicago Booth Business School: “Chicago Booth’s Jing Cynthia Wu and Fan Dora Xia, now at the Bank of International Settlements, devised an alternate shadow Fed Funds rate that can be negative, reflecting the Fed’s additional easing through unconventional policies.”

Like our adjusted Fed Funds rate above, the Wu Xia Shadow Rate quantifies the effective Fed Funds rate accounting for QE.  As we show below, the Wu Xia model estimates that Fed Funds are essentially negative 2.50% today.

Why?

With the data above showing the unprecedented nature of monetary stimulus, we must ask why the Fed continues to drag its feet and maintain extreme crisis level policy.  Maybe Congress should ask Powell why is he ignoring their mandate?  

We think there are two answers.

Market Fragility Frightens the Fed

First, the financial system is highly fragile. QE helps stabilize falling markets and provides a solid tailwind for asset prices. However, it does little to incentivize borrowing and economic growth.

The S&P 500 is up 34% since the pre-pandemic highs. Over the same period, real GDP has grown less than 1% and S&P 500 earnings by 14%. Further, junk ccc-rated bonds now yield 7.5%, down 4.5% from pre-pandemic levels. There are many more examples of asset prices that have exceeded the fundamentals backing them. 

Asset prices and valuations, which were already historically elevated, have become even richer. The markets are banking on the Fed to keep stimulus rolling. The Fed understands its role. They have repeatedly mentioned that they will be very slow to remove stimulus to not upset “financial stability.”

Financial stability is code for asset prices, and the last thing the Fed wants to do is pop a bubble, especially since they blew it up. 

Debt Fragility Frightens the Fed

Second, fiscal prudence is a joke, as we were recently reminded when Congress raised the debt ceiling for the 81st time.  

Increasing debt is not necessarily bad. However, when it grows much faster than the ability to pay for it, it becomes problematic. The ratio of Federal debt to GDP now stands at 125%, up from 105% before the pandemic and more than double the percentage from before the financial crisis.

The Treasury needs low-interest rates and consistent buyers of their debt to keep such an unsustainable pace going. Through zero interest rates and purchases of $80 billion Treasury notes a month, the Fed fills both needs.

Without extremely low-interest rates to make the new and existing debt affordable, economic growth would disappear, and financial defaults would be plentiful.  The Fed must believe they must help Congress worsen the nation’s fiscal imbalances versus dealing with the problem in a sustainable manner. Expediency at tomorrow’s cost, once again, seems to be winning the day.

Summary

The Fed does not want to pierce multiple asset bubbles or force the Treasury to pay normal market interest rates. The financial markets are extremely fragile, and the debt situation is unsustainable. Hiding such actions under the guise of appropriate monetary policy seems to be their modus operandi. 

They will continue to use gibberish arguments to avoid addressing the real problems. William White, a distinguished economist with significant central bank experience, writes: “Perhaps the real framework is anything that justifies not tightening?

Use caution when investing. “The most inappropriate monetary policy” is the sole bedrock supporting the most egregious asset valuations in well over 100 years.

The post What is the Federal Reserve Hiding From Us? appeared first on RIA.

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Are Voters Recoiling Against Disorder?

Are Voters Recoiling Against Disorder?

Authored by Michael Barone via The Epoch Times (emphasis ours),

The headlines coming out of the Super…

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Are Voters Recoiling Against Disorder?

Authored by Michael Barone via The Epoch Times (emphasis ours),

The headlines coming out of the Super Tuesday primaries have got it right. Barring cataclysmic changes, Donald Trump and Joe Biden will be the Republican and Democratic nominees for president in 2024.

(Left) President Joe Biden delivers remarks on canceling student debt at Culver City Julian Dixon Library in Culver City, Calif., on Feb. 21, 2024. (Right) Republican presidential candidate and former U.S. President Donald Trump stands on stage during a campaign event at Big League Dreams Las Vegas in Las Vegas, Nev., on Jan. 27, 2024. (Mario Tama/Getty Images; David Becker/Getty Images)

With Nikki Haley’s withdrawal, there will be no more significantly contested primaries or caucuses—the earliest both parties’ races have been over since something like the current primary-dominated system was put in place in 1972.

The primary results have spotlighted some of both nominees’ weaknesses.

Donald Trump lost high-income, high-educated constituencies, including the entire metro area—aka the Swamp. Many but by no means all Haley votes there were cast by Biden Democrats. Mr. Trump can’t afford to lose too many of the others in target states like Pennsylvania and Michigan.

Majorities and large minorities of voters in overwhelmingly Latino counties in Texas’s Rio Grande Valley and some in Houston voted against Joe Biden, and even more against Senate nominee Rep. Colin Allred (D-Texas).

Returns from Hispanic precincts in New Hampshire and Massachusetts show the same thing. Mr. Biden can’t afford to lose too many Latino votes in target states like Arizona and Georgia.

When Mr. Trump rode down that escalator in 2015, commentators assumed he’d repel Latinos. Instead, Latino voters nationally, and especially the closest eyewitnesses of Biden’s open-border policy, have been trending heavily Republican.

High-income liberal Democrats may sport lawn signs proclaiming, “In this house, we believe ... no human is illegal.” The logical consequence of that belief is an open border. But modest-income folks in border counties know that flows of illegal immigrants result in disorder, disease, and crime.

There is plenty of impatience with increased disorder in election returns below the presidential level. Consider Los Angeles County, America’s largest county, with nearly 10 million people, more people than 40 of the 50 states. It voted 71 percent for Mr. Biden in 2020.

Current returns show county District Attorney George Gascon winning only 21 percent of the vote in the nonpartisan primary. He’ll apparently face Republican Nathan Hochman, a critic of his liberal policies, in November.

Gascon, elected after the May 2020 death of counterfeit-passing suspect George Floyd in Minneapolis, is one of many county prosecutors supported by billionaire George Soros. His policies include not charging juveniles as adults, not seeking higher penalties for gang membership or use of firearms, and bringing fewer misdemeanor cases.

The predictable result has been increased car thefts, burglaries, and personal robberies. Some 120 assistant district attorneys have left the office, and there’s a backlog of 10,000 unprosecuted cases.

More than a dozen other Soros-backed and similarly liberal prosecutors have faced strong opposition or have left office.

St. Louis prosecutor Kim Gardner resigned last May amid lawsuits seeking her removal, Milwaukee’s John Chisholm retired in January, and Baltimore’s Marilyn Mosby was defeated in July 2022 and convicted of perjury in September 2023. Last November, Loudoun County, Virginia, voters (62 percent Biden) ousted liberal Buta Biberaj, who declined to prosecute a transgender student for assault, and in June 2022 voters in San Francisco (85 percent Biden) recalled famed radical Chesa Boudin.

Similarly, this Tuesday, voters in San Francisco passed ballot measures strengthening police powers and requiring treatment of drug-addicted welfare recipients.

In retrospect, it appears the Floyd video, appearing after three months of COVID-19 confinement, sparked a frenzied, even crazed reaction, especially among the highly educated and articulate. One fatal incident was seen as proof that America’s “systemic racism” was worse than ever and that police forces should be defunded and perhaps abolished.

2020 was “the year America went crazy,” I wrote in January 2021, a year in which police funding was actually cut by Democrats in New York, Los Angeles, San Francisco, Seattle, and Denver. A year in which young New York Times (NYT) staffers claimed they were endangered by the publication of Sen. Tom Cotton’s (R-Ark.) opinion article advocating calling in military forces if necessary to stop rioting, as had been done in Detroit in 1967 and Los Angeles in 1992. A craven NYT publisher even fired the editorial page editor for running the article.

Evidence of visible and tangible discontent with increasing violence and its consequences—barren and locked shelves in Manhattan chain drugstores, skyrocketing carjackings in Washington, D.C.—is as unmistakable in polls and election results as it is in daily life in large metropolitan areas. Maybe 2024 will turn out to be the year even liberal America stopped acting crazy.

Chaos and disorder work against incumbents, as they did in 1968 when Democrats saw their party’s popular vote fall from 61 percent to 43 percent.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times or ZeroHedge.

Tyler Durden Sat, 03/09/2024 - 23:20

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Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

The…

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Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

The U.S. Department of Veterans Affairs (VA) reviewed no data when deciding in 2023 to keep its COVID-19 vaccine mandate in place.

Doses of a COVID-19 vaccine in Washington in a file image. (Jacquelyn Martin/Pool/AFP via Getty Images)

VA Secretary Denis McDonough said on May 1, 2023, that the end of many other federal mandates “will not impact current policies at the Department of Veterans Affairs.”

He said the mandate was remaining for VA health care personnel “to ensure the safety of veterans and our colleagues.”

Mr. McDonough did not cite any studies or other data. A VA spokesperson declined to provide any data that was reviewed when deciding not to rescind the mandate. The Epoch Times submitted a Freedom of Information Act for “all documents outlining which data was relied upon when establishing the mandate when deciding to keep the mandate in place.”

The agency searched for such data and did not find any.

The VA does not even attempt to justify its policies with science, because it can’t,” Leslie Manookian, president and founder of the Health Freedom Defense Fund, told The Epoch Times.

“The VA just trusts that the process and cost of challenging its unfounded policies is so onerous, most people are dissuaded from even trying,” she added.

The VA’s mandate remains in place to this day.

The VA’s website claims that vaccines “help protect you from getting severe illness” and “offer good protection against most COVID-19 variants,” pointing in part to observational data from the U.S. Centers for Disease Control and Prevention (CDC) that estimate the vaccines provide poor protection against symptomatic infection and transient shielding against hospitalization.

There have also been increasing concerns among outside scientists about confirmed side effects like heart inflammation—the VA hid a safety signal it detected for the inflammation—and possible side effects such as tinnitus, which shift the benefit-risk calculus.

President Joe Biden imposed a slate of COVID-19 vaccine mandates in 2021. The VA was the first federal agency to implement a mandate.

President Biden rescinded the mandates in May 2023, citing a drop in COVID-19 cases and hospitalizations. His administration maintains the choice to require vaccines was the right one and saved lives.

“Our administration’s vaccination requirements helped ensure the safety of workers in critical workforces including those in the healthcare and education sectors, protecting themselves and the populations they serve, and strengthening their ability to provide services without disruptions to operations,” the White House said.

Some experts said requiring vaccination meant many younger people were forced to get a vaccine despite the risks potentially outweighing the benefits, leaving fewer doses for older adults.

By mandating the vaccines to younger people and those with natural immunity from having had COVID, older people in the U.S. and other countries did not have access to them, and many people might have died because of that,” Martin Kulldorff, a professor of medicine on leave from Harvard Medical School, told The Epoch Times previously.

The VA was one of just a handful of agencies to keep its mandate in place following the removal of many federal mandates.

“At this time, the vaccine requirement will remain in effect for VA health care personnel, including VA psychologists, pharmacists, social workers, nursing assistants, physical therapists, respiratory therapists, peer specialists, medical support assistants, engineers, housekeepers, and other clinical, administrative, and infrastructure support employees,” Mr. McDonough wrote to VA employees at the time.

This also includes VA volunteers and contractors. Effectively, this means that any Veterans Health Administration (VHA) employee, volunteer, or contractor who works in VHA facilities, visits VHA facilities, or provides direct care to those we serve will still be subject to the vaccine requirement at this time,” he said. “We continue to monitor and discuss this requirement, and we will provide more information about the vaccination requirements for VA health care employees soon. As always, we will process requests for vaccination exceptions in accordance with applicable laws, regulations, and policies.”

The version of the shots cleared in the fall of 2022, and available through the fall of 2023, did not have any clinical trial data supporting them.

A new version was approved in the fall of 2023 because there were indications that the shots not only offered temporary protection but also that the level of protection was lower than what was observed during earlier stages of the pandemic.

Ms. Manookian, whose group has challenged several of the federal mandates, said that the mandate “illustrates the dangers of the administrative state and how these federal agencies have become a law unto themselves.”

Tyler Durden Sat, 03/09/2024 - 22:10

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Low Iron Levels In Blood Could Trigger Long COVID: Study

Low Iron Levels In Blood Could Trigger Long COVID: Study

Authored by Amie Dahnke via The Epoch Times (emphasis ours),

People with inadequate…

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Low Iron Levels In Blood Could Trigger Long COVID: Study

Authored by Amie Dahnke via The Epoch Times (emphasis ours),

People with inadequate iron levels in their blood due to a COVID-19 infection could be at greater risk of long COVID.

(Shutterstock)

A new study indicates that problems with iron levels in the bloodstream likely trigger chronic inflammation and other conditions associated with the post-COVID phenomenon. The findings, published on March 1 in Nature Immunology, could offer new ways to treat or prevent the condition.

Long COVID Patients Have Low Iron Levels

Researchers at the University of Cambridge pinpointed low iron as a potential link to long-COVID symptoms thanks to a study they initiated shortly after the start of the pandemic. They recruited people who tested positive for the virus to provide blood samples for analysis over a year, which allowed the researchers to look for post-infection changes in the blood. The researchers looked at 214 samples and found that 45 percent of patients reported symptoms of long COVID that lasted between three and 10 months.

In analyzing the blood samples, the research team noticed that people experiencing long COVID had low iron levels, contributing to anemia and low red blood cell production, just two weeks after they were diagnosed with COVID-19. This was true for patients regardless of age, sex, or the initial severity of their infection.

According to one of the study co-authors, the removal of iron from the bloodstream is a natural process and defense mechanism of the body.

But it can jeopardize a person’s recovery.

When the body has an infection, it responds by removing iron from the bloodstream. This protects us from potentially lethal bacteria that capture the iron in the bloodstream and grow rapidly. It’s an evolutionary response that redistributes iron in the body, and the blood plasma becomes an iron desert,” University of Oxford professor Hal Drakesmith said in a press release. “However, if this goes on for a long time, there is less iron for red blood cells, so oxygen is transported less efficiently affecting metabolism and energy production, and for white blood cells, which need iron to work properly. The protective mechanism ends up becoming a problem.”

The research team believes that consistently low iron levels could explain why individuals with long COVID continue to experience fatigue and difficulty exercising. As such, the researchers suggested iron supplementation to help regulate and prevent the often debilitating symptoms associated with long COVID.

It isn’t necessarily the case that individuals don’t have enough iron in their body, it’s just that it’s trapped in the wrong place,” Aimee Hanson, a postdoctoral researcher at the University of Cambridge who worked on the study, said in the press release. “What we need is a way to remobilize the iron and pull it back into the bloodstream, where it becomes more useful to the red blood cells.”

The research team pointed out that iron supplementation isn’t always straightforward. Achieving the right level of iron varies from person to person. Too much iron can cause stomach issues, ranging from constipation, nausea, and abdominal pain to gastritis and gastric lesions.

1 in 5 Still Affected by Long COVID

COVID-19 has affected nearly 40 percent of Americans, with one in five of those still suffering from symptoms of long COVID, according to the U.S. Centers for Disease Control and Prevention (CDC). Long COVID is marked by health issues that continue at least four weeks after an individual was initially diagnosed with COVID-19. Symptoms can last for days, weeks, months, or years and may include fatigue, cough or chest pain, headache, brain fog, depression or anxiety, digestive issues, and joint or muscle pain.

Tyler Durden Sat, 03/09/2024 - 12:50

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