Act II: The Lie Unwinds

It’s been said that you can’t please everyone all the time. But can you fool enough people some of the time? That’s Jay Powell’s game in a nutshell. He’s got the world believing the Federal Reserve is out here printing gobs of money and sending a tidal wave careening throw the whole economy (stock market first). Nope. Monetary policy is little more than getting people to believe this is what’s happening.

For a little while this year, he was on his game. Remember May 17? That particular Sunday night Chairman Powell joined Scott Pelley who Jay knew would go along with the ruse; no one ever challenges these people. Instead, Pelley let the central banker uncork one lie after another.

Figuring out why he’d do something so dastardly is easy; times were bad, really bad. In a deflationary situation such as that, the Economics textbooks says, in no uncertain terms, central banks commit all hands on deck to sell its counter before the deflation sets in too far. Inflation expectations are the model antidote.

So, in the middle of May 2020, as the initial QE stuff wasn’t doing it by itself, Powell became the first top Federal Reserve policymaker to explicitly cop to “digital money printing.” That’s what he actually said. And he said knowing full well that saying it would make headlines around the world after it had already lit up social media.

Both of those things proved to be actually true.

The digital money printing, not so much. Digital creation of bank reserves, sure, but that’s no fine line distinction without a difference. The simple truth, as Jay knows, is that bank reserves are not money.

Didn’t matter because it was said this was a game-changer. The Fed had finally taken off its gloves and wasn’t going let traditional boundaries stand in the way. The circumstances called for drastic changes, to which Powell more than obliged. He made his stand and made it plainly.

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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