Who’s Afraid of Jerome Powell?

[...] It’s time to put it all in order. With ‘Build Back Better’ dead there is no more insane new spending to monetize. There is no reason for the Fed to keep up QE or rates at the zero-bound. Savings is down, money is circulating again. Inflation isn’t transitory.

People want to work. COVID-9/11 is behind us. The anger over losing two years is just getting started but that’s a different wrinkle to this story for another day.

If the Fed isn’t intimidated by the recent weakness in stocks, in truth a healthy correction after a massive run, and raises rates on Wednesday we have our answer as to what Powell and friends are willing to do. Whatever your opinion of it is, it will not be a ‘policy error’ but a clear-eyed understanding that it’s time to rein it in, change the direction of the big boat, and begin living within our means.

If he doesn’t it won’t be the opposite signal. It will simply mean that they’ll take another couple of months to nail down the particulars, namely getting proper control over the O’Biden administration, and begin hiking on schedule per the current expectations in the Eurodollar futures market.

Has anyone looked at the ratings for pro sports? Old media? Hollywood box office receipts? All down. Netflix is getting killed because it’s growth cannot sustain its valuation, much like a lot of the NASDAQ. This is something that should have happened two or three years ago, just like Tesla.

But didn’t because of COVID-19 and the massive wealth transfer the stimulus provided to them during the absence of sanity oceans of money always produces.

That said, these are all unsustainable Ponzi scheme masquerading as viable industries based on cheap money and malinvestment in politically-motivated production.

Now I’m not suggesting for a second that Powell is some kind of saint or anything. He’s no savior sent down to redeem us sinful ballers from our excesses. No sir. He represents the very people that helped create this mess.

But at the same time, they want to remain where they are. They are not willing to hand their power and their money over to another group within the cartel.

They didn’t get where they were putting their money on the table to bail out anyone else.

And they won’t this time.

All I’m doing here is assessing what everyone’s real motivations are and who they answer to. To quote another, far more classic television show, “The universe is run by the interweaving of three elements: Energy, matter, and enlightened self-interest.”

And, to me, where’s the enlightened self-interest angle for the NY Boys, represented by Powell, for turning over their business to a bunch of European and Chinese commies?

When you step back and really look at what’s happening, they have already told Europe, China and all those emerging markets currently whining, the post-COVID world you created is your mess now.

This is why I’m convinced the Fed will hike and hike aggressively this year, maybe starting on Wednesday.

There is no deal possible between Wall St., City of London and Europe. In that game, Europe loses. If China wants to play hardball and default on foreign-held property debt, fine. Have fun attracting any capital in the future.

All the fiscal projections of the U.S.’s insolvency are great (and accurate) but I hate to burst anyone’s bubble, literally, but you CAN taper a Ponzi scheme if you’re 1) the biggest Ponzi and 2) control the flow of funds into them.

And if you don’t think Powell and his backers at the NY Fed aren’t willing to sacrifice a few thousand points on the Dow or even a few points of GDP, to restructure the US’s finances for the long term while the Fed hands them all the collateral and liquidity they need to keep playing while everyone else craps out, I do believe you are terminally naïve.

It’s what they call playing hard ball.

There are two ways to reset the monetary system. The first option is printer go brrr and default by switching out the old currency for a new one. The other is collapse the old system by returning risk and rebuilding it after the malinvestment is gone.

Paul Volcker chose the latter to finally establish the Dollar Reserve Standard as the only game in town. Nixon set the process in motion, Volcker closed the deal. It’s what established today’s game.

We are at an inflection point in history, both monetary and geopolitical. I discussed this in my latest podcast with Alex Krainer and believe the rules of the game have fundamentally changed. The next game will look a lot different than the baller one we’ve been playing.

Those who won’t adjust to that or admit it should be very afraid of what Jerome Powell does next. (read more)