The government shows signs of approaching a full-scale crisis, and the stock market mirrors this unstable trend. However, these issues are only surface-level distractions from the deeper, systemic breakdown awaiting us.
The average worker has little time or energy to unpack the complex jargon coming from the Federal Reserve. Their daily grind leaves them fatigued, preventing any real understanding of the widening chasm between wage earners and the wealthiest individuals. This lack of awareness contributes to the public’s inability to grasp the extent of the theft occurring right under their noses.
Were there a better grasp of the extensive and organized plunder taking place, those responsible for the mass depreciation of money would be publicly shamed. This seems a modest punishment compared to their actions, which have transformed markets into casinos while undermining the reward for honest work. Instead, they maintain their misguided authority by obscuring simple truths, complicating them into an inextricable web of confusion.
A few months ago, in mid-May, the yield of the 10-Year Treasury note temporarily surpassed 3 percent. This sparked a flurry of articles—some from our own platform—discussing the potential end of a long-standing Treasury bond bubble. Yet, just as swiftly as it rose, the yield fell back below 3 percent, vanishing like a pickpocket in a bustling crowd.
As the days shorten, the 10-Year Treasury yield is now approaching 3 percent again, sitting at around 3.19 percent. Meanwhile, the 30-Year Treasury yield is slightly higher by about 16 basis points. Both yields are creeping upward, albeit at a slower pace than the Fed’s systematic rate increases.
Hearing Voices
Such inconsistencies likely drive central bankers to seek otherworldly insights. Recently, Minneapolis Fed President Neel Kashkari did something quite unusual. The man famously known for his intense gaze and outlandish ideas stepped away from monitoring the daily Treasury yield rates. Instead, he focused wholly on the ether.
From the banks along the upper Mississippi, he took a moment during deep meditation. Eyes closed and breathing slow, Kashkari discerned a whisper before it transformed into a murmur. Ultimately, he found himself listening to the voices—those of interest rates—sharing profound insights. Here, Kashkari relayed what these voices conveyed:
“The bond market is saying, ‘hey we’re not so sure that the U.S. economic growth is going to be very strong in the future years.’
These ominous pronouncements from the bond market, countering the Fed’s dot plot, have led Kashkari to believe that further increases in the federal funds rate may be unnecessary.
Kashkari is undoubtedly a radical economic interventionist, and his views often seem eccentric. He openly expresses his intentions and positions, wearing his beliefs unapologetically.
For context, during his tenure as the federal bailout chief, he became a prominent figure in the market. When the economic crisis hit in early 2009, Kashkari committed to dispersing Hank Paulson’s $700 billion TARP funds to favored financial institutions each day.
This experience took a toll on his mental well-being, leading him to retreat to a cabin in the Sierra Nevada Mountains to pursue a simpler life of chopping wood. It seemed we had seen the last of him.
However, true believers often struggle to leave public life behind. After a failed run for governor of California in 2014, losing to Jerry Brown, Kashkari reemerged as the Minneapolis Fed President in 2016. It appears this role was his reward for the scrutiny he endured from various lawmakers while disbursing substantial taxpayer dollars—your dollars—to Wall Street banks.
Are the Voices in Fed President Kashkari’s Head Speaking Lies?
Despite this background, Kashkari’s current role has its merits. He brings an unusual blend of clarity and eccentricity to the job, making no secret of the Fed’s actions.
Kashkari openly supports the endless creation of credit that leads to perpetual economic bubbles. According to his monetary policy framework, this is the key to boosting economic output, generating jobs, and achieving full employment. While many would dispute such claims, at least he is transparent about his intentions.
Others within the Fed occasionally hint at tightening monetary policy for future flexibility in rate cuts. Recently, during a Q&A with Judy Woodruff of PBS, Fed Chair Jerome Powell offered guidance that was contradictory to Kashkari’s views. He noted:
“The extremely accommodative low interest rates that were necessary when the economy was weak are no longer appropriate. Interest rates remain accommodating, but we are gradually moving toward a neutral position and could even surpass that, even though we are likely still far from it.”
In the wake of Powell’s remarks, the yield on the 10-Year Treasury note surged by 15 basis points. This notable increase raises several questions…
Are the voices in Kashkari’s head misleading him? Are we on the verge of a prolonged cycle of rising interest rates, where borrowing costs will escalate? The outcome remains uncertain, but it appears the current American reality of debt servitude indicates that we will face widespread defaults as we transition into this new cycle. Additionally, there is an enormous accumulation of public, private, and corporate debt waiting to be addressed.
We anticipate this reckoning will be significantly disruptive.
Sincerely,
MN Gordon
for Economic Prism
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