Lacker To Learn Loose Lips Sink Ships ~ The Risk Averse Alert

Wednesday, November 21, 2012

Lacker To Learn Loose Lips Sink Ships

On the same day Capo Confetti was wowing the Club in New York the U.S. Monetary Mafia's Richmond Don appeared before the Shadow Open Market Committee's Symposium at another New York City location apparently venturing to do his level best to put the "freeze" in the Fraud Chairman's policy. The event, titled "The Fed’s Monetary Policy Adrift," probably is better seen a smoke screen, however. A variation on the "divide and conquer" strategy looks to be the game plan being deployed by the hopelessly bankrupt Fed.

Apparently, running this ruse through the Federal Reserve's regional bank located in the former capital of the 19th century's U.S. Rebel Confederacy, the Fed's marks—securities holders at every level of the capital structure, both domestic and foreign—are to be more convincingly persuaded by Richmond Fed President Jeffrey Lacker's focus on the Fed's "credibility." Yet wasting no time Lacker gave his unwitting confession that, the Fed in fact has no credibility. This he revealed at the start of his speech summarizing the Fed's track record regarding inflation in the United States.

You see, the frauds who have made careers of wrecking capitalism through their rationalization of a wildcat credit policy blind to distinctions separating an economy's productive debt from its casino-issued credit (whose principal purpose clearly has been to erect an inescapable debt trap) are woefully incapable of discerning how they have, as well, sewn the seeds of hyperinflation and consequent political destruction. Even if you were to believe Lacker's cooing that, "specifically, since December of 1993, inflation (as measured by the price index for personal consumption expenditures) has averaged very close to 2 percent per year," there is the currently pressing matter of runaway energy costs whose impact touches everything. Mere words professing "enhanced public confidence in the Fed’s willingness and ability to keep inflation low and stable" meet this both morally and financially bankrupt institution's utter incapacity to insure its "good performance" into the foreseeable future. Capo Confetti's confession that, certain critical forecasts failed to materialize in the post-2008 crisis period only finds another failed forecast waiting in the wings, this being the one that assumes rising energy costs are but a "temporary" phenomenon. Should the purveyors of such views as these continue their hold on policy, then my forecast is that, the only thing "temporary" will be the relatively low cost of energy, presently, contrasted to what is yet to come.

Suckers properly baited, Lacker goes on to comment on "Communicating Policy Actions." Here, the "freeze" the Fed ventures in its "good cop, bad cop," divide and conquer strategy starts becoming apparent. Yet Lacker's unsubstantiated sophistry evoking images of a Fed acting as clinical psychologist analyzing market perceptions of its policy statements hardly bolsters the Fed's "credibility." Rather, the Federal Reserve's deadly speculative addiction is exposed here to reveal the full measure of panic driving its actions. "How to Hyperinflate Without Giving Away the Store" might more suitably characterize the Fed's new found imperative toward openness in communicating its policy actions. Lacker says, "It should be unobjectionable ... to provide forward guidance that reduces unnecessary uncertainty about the central bank’s reaction function and thereby helps people make better predictions about future monetary policy." Truth is it should be unnecessary to provide any forward guidance at all.

Certainly, Lacker's objection to targeting employment as a component measure driving Fed policy reveals the man's understanding of the hyperinflationary dynamic the Fed is promoting to the effect of collapsing employment prospects. What he essentially is admitting is that, the Fed cannot mask its hyperinflation of credit were employment levels driving its actions. Or, if you prefer a more contentious tone, Lacker is showing a true fascist's colors elevating money, and the status of those who control its distribution throughout the economy, above the human condition itself. (Lacker's sophistry rationalizing his position on this account rightly should be questioned by any American holding "domestic Tranquility" and "the general Welfare" as supreme objectives of U.S. policy of every sort.)

Depending on their political affiliation, I suppose, most observers might judge whether Lacker is playing "good cop" or "bad cop" from his discussion on the Fed's post-crisis programs for conducting asset purchases and intervening in credit markets. Yet no matter which judgment is passed, one simply must conclude his stated objections to current Fed policy are entirely disingenuous. How does one "fully [support] the first wave of purchases of U.S. Treasury securities ... back in 2009" and demure "[rescuing] short-term creditors, [as] the additional precedent reinforces expectations of future rescues and further intensifies moral hazard?" How conveniently does the Richmond Fed President sidestep the fact that, the short-term creditor rescued in 2009 was the Fed itself! Certainly its utter lack of due diligence during the Greenspan era was at the root of 2008's systemically threatening crisis. Private sector creditors who took the fall merely were a "fill in the blank" postscript to the Fed's decades-running accommodation to Ponzi finance. Sorry Lacker, but the Fed's "credibility" has long expired.

It has been a while since it was argued here that, per the matter of maintaining the illusion of the trans-Atlantic banking system's solvency, every minute counts. Yet it is on this account that call for "humility" formerly promoted by Senator Bob Corker (R-TN) now seconded by Richmond Fed President Jeffrey Lacker in his concluding remarks on "Limiting Central Bank Lending" seems little more than an exercise in buying time, this that today's holders of securities at every layer of the capital structure be frozen in perception the banking system is anything but hopelessly insolvent. Limit central bank lending? In your dreams, Lacker! Not gonna happen. So, remaining to be seen is just how much longer the mere suggestion of such a policy change could forestall a rush to the exits (particularly those of core bond markets). Lacker's attempt to reinforce a perception believing the banking system's vulnerability has been stabilized, if not overcome, and so could withstand a more restrictive Fed is laughable. Truth is were central bank lending limited, the banking system would collapse. Yet that central banks have no choice but hyperinflate (outside a major debt reorganization that is), attendant bond market chaos but waits in the wings. The Fed's ongoing, attempted balancing act all too likely is on its last legs within the arena called "credible." If this were not so, then surely the Fed would be talking a lot less...

Word on the Street
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