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Tom Luongo
\nGold Goats \u2018n Guns<\/p>\n
When all you have left is managing narratives, managing narratives becomes a full time job.<\/p>\n
This is where\u00a0The Davos Crowd<\/em>\u00a0is today\u2013 just before the next Fed rate hike and just over three months out from the US mid-term elections.<\/p>\n It doesn\u2019t matter the subject anymore, everything is managed, massaged, wheedled or cajoled into a convenient definition which serves some aspect of the\u00a0Davos\u00a0<\/em>agenda. Last week it was blaming Russia for the West\u2019s financial problems \u2013 food and energy shortages forcing the ECB to raise rates.<\/p>\n This week we\u2019re going to be redefining a \u2018recession\u2019 and shifting the blame for it to the Federal Reserve.<\/p>\n Treasury Secretary cum Vice President Janet Yellen prepped the stage last week, using her gravitas (*snort*) to proclaim that she \u201cdoesn\u2019t see a recession\u201d on the horizon. Now the O\u2019Biden administration\u00a0is redefining recession\u00a0<\/a>away from the technical definition of two straight quarters of negative GDP growth.<\/p>\n While some maintain that two consecutive quarters of falling real GDP constitute a recession, that is neither the official definition nor the way economists evaluate the state of the business cycle.<\/p><\/blockquote>\n I could spend a thousand words picking apart the faults in this one sentence but I\u2019m not going to because that would give this credence far beyond what it deserves.<\/p>\n Since Lehman Bros. fell in 2008 and\u00a0Ben Bernanke *cough* saved the world in 2009<\/a>\u00a0we\u2019ve avoided a technical recession for now 13 years. Obama was re-elected on this narrative.<\/p>\n Easy money and ZIRP \u2014 Zero-bound Interest Rate Policy \u2014 kept the US from printing those dreaded two consecutive quarters of negative GDP growth. Now, when that condition can no longer be avoided what are we expected to swallow?<\/p>\n The redefinition of a recession into whatever technobabble worthy of an episode of\u00a0Star Trek<\/em>\u00a0comes out of the mouths of official smart people known as \u2018economists.\u2019<\/p>\n This is obviously just another political tool to appeal to middle-class midwits who still want to believe Trump is the devil, Fauci is the High Priest of Science and Democrats aren\u2019t communists so they can feel smart and justify voting for more beatings until morale improves.<\/p>\n This \u201cBlame the Fed\u201d tactic began with\u00a0Lizzie Slapaho out there braying on about FOMC Chairman Jerome Powell<\/a>\u00a0during last month\u2019s Senate testimony:<\/p>\n \u201cWhat\u2019s worse than high inflation and low unemployment?\u201d asked Senator Elizabeth Warren as the Fed chief gave congressional testimony last month. \u201cIt\u2019s high inflation and a recession with millions of people out of work\u2026. I hope you\u2019ll reconsider that,\u201d she added, \u201cbefore you drive this economy off a cliff.<\/p><\/blockquote>\n As Zerohedge points on in the article linked above it\u2019s now those same expert \u2018economists\u2019 who have become experts in domestic politics, assisting\u00a0Davos\u00a0<\/em>and the Democrats in constructing this narrative.<\/p>\n What\u2019s already begun is a series of headlines to manufacture consent that the Democrats\u2019 chief rival, Powell and the Fed, are to blame for this \u2018not-a-recession\u2019 and not the O\u2019Biden policies and the trillions of spending they unleashed.<\/p>\n That spending plus the unprecedented attack on supply chains for basic goods like food and energy by the West to \u2018starve Russia of its war machine\u2019 has created a situation where inflation is endemic, not affected much, if at all, by Fed interest rate policy.<\/p>\n What\u2019s hilarious about this is, when you stop and think about it, it\u2019s been the Fed that has blunted some of the worst effects of all of this by beginning stealth tightening last year and carrying through with real tightening this year.<\/p>\n That sterilized nearly $2 trillion within its Reverse Repo facility. Imagine what inflation would be if those yesterday dollars were chasing today\u2019s fewer goods?<\/p>\n Recession itself is a euphemism. It was created during the stagflationary period of the 1970\u2019s to soften the psychological blow of the failure of Keynesian economic theories then. Back then the idea of high unemployment and high inflation was not possible.\u00a0The Phillips Curve\u00a0<\/a>ruled in the minds of the experts.<\/p>\n And yet there we were with double-digit inflation and miserable unemployment. Instead of coming clean and calling it what it was, an inflationary depression, we invented new terms\u00a0recession\u00a0<\/em>and\u00a0stagflation<\/em>, because we\u2019re all\u00a0 Depression got redefined as a 10% drop in GDP, which, thanks to countercyclical government spending and accommodative central bank policy, would never happen again, at least statistically.<\/p>\n And thus,\u00a0Management of Perspective Economics<\/a>\u00a0(MOPE) was born.<\/p>\n I wrote about MOPE in the early days of the 2020 election steal.<\/p>\n {MOPE}<\/strong>\u00a0is a combination mal-educated traders and investment advisers, corporate interests, government corruption actively massaging the data and a media which saturates the airwaves with patent nonsense from \u2018experts\u2019 who interpret what everything means for us.<\/p>\n This is the architecture of MOPE.<\/p>\n Unfortunately, each 4 year cycle of lies and money printing invariably ends in a serio-comic repudiation of the whole MOPE strategy as markets spasm and no one can ever tell us why it happened?<\/p><\/blockquote>\n Around the time of elections MOPE becomes the main weapon of MOPP \u2014 Mgt. of Perspective Politics. And the clear MOPP strategy for this year\u2019s mid-terms is \u2018If you are miserable, Blame the Fed.\u2019<\/p>\n But, honestly, that\u2019s a losing strategy. Most people have no idea what the Fed is or why raising interest rates now is bad, nor will they care. They have no control over the Fed, but they do have control over their vote.<\/p>\n Well, nominally.<\/p>\n So, they will lash out at the party in power because that\u2019s what they can do. And even if you do convince them that Powell is to blame they will simply ask the question, \u201cThen why did you reappoint him?\u201d<\/p>\n This is the single most asked question I get whenever I start presenting my argument that the Fed and the O\u2019Biden administration are at loggerheads. The answer is simple, Biden had no choice because he didn\u2019t have the votes in the Senate.<\/p>\n And why do you think that is?\u00a0Y\u2019all know my answer to that.<\/a><\/p>\n To me, this part is actually true. The Fed is fighting the O\u2019Biden administration (and\u00a0Davos)<\/em>, working to secure the worst mid-term blowout loss for the Democrats since Newt Gringrich became a household name in 1994.<\/p>\n It\u2019s not a hard sell here. Because people aren\u2019t nearly as dumb as our media treats them. They understand cause and effect. Biden entered office with gas around $1.85 a gallon. Now it\u2019s back down to $4.00 after going to $5.00.<\/p>\n And somehow Biden should be praised for stopping it from going to $6.00? If the Fed is tightening and that\u2019s causing a recession then doesn\u2019t the Fed get some of the credit for bringing down gas prices?<\/p>\n I know logic is an advanced skill these days but this isn\u2019t that tough to understand.<\/p>\n The political messaging of blaming the Fed for the recession simply isn\u2019t going to work. It\u2019s the fever dream of people who have been sniffing their own farts inside of the Beltway echo chamber for too long.<\/p>\n It\u2019s not a strategy, it\u2019s anoxia.<\/p>\n It\u2019s too complicated, too fraught with inconsistencies and frankly not relevant to people\u2019s lived experiences.<\/p>\n Americans are angry. They know they have been and continue to be lied to. What they want more than anything else is for someone,\u00a0ANYONE<\/strong><\/em>,<\/strong>\u00a0to tell them the truth. If\u00a0Davos\u00a0<\/em>is still backing the Democrats rather than shifting behind the GOP establishment then they are in worse shape than even I think they are.<\/p>\n This week we\u2019re set to get a flood of bad economic data. Inflation is still rising. Keynesian orthodoxy demands the Fed raise until inflation moderates.<\/p>\n Either we\u2019re Keynesian or we aren\u2019t Lizzie, which one is it?<\/p>\n Is the Fed supposed to be politicized or independent?<\/p>\n This is the Catch-22 of MOPP. At some point you begin contradicting yourself to the point where even the \u2018rubes in the bicoastal suburbs\u2019 can smell the bullshit.<\/p>\n We here in \u2018flyover country\u2019 got used to the smell a long time ago.<\/p>\n But it doesn\u2019t matter. The anger is palpable. It won\u2019t be slaked by blame shifting.<\/p>\n So where are we today?<\/p>\n The Fed is due to raise rates at least another 75 basic points, to 2.25%. After the ECB \u2018shocked\u2019 markets with 50 basis points last week, I won\u2019t be surprised if the Fed goes 100.<\/p>\n But I\u2019m not banking on that. Powell has all the cards to play here. He has another meeting before the mid-terms. His stated goal is 4% by year end. He\u2019s got plenty of options now to get to that target.<\/p>\n And every time inflation comes in hotter than expected he\u2019s got the ammunition to go bigger.<\/p>\n And whose ox gets gored when that happens? Europe\u2019s zombie banks who have exactly zero friends in the world now outside of Europe.<\/p>\n Because this time, unlike in 2018, Powell has the tools in place \u2014 SOFR, mainly \u2014 to make these rate hikes stick by decoupling US bank stress from that of Europe.<\/p>\n Hiking by 100 (aping the Bank of Canada who sent a stern warning to TrueDOH!) would further underscore my argument that the Fed is raising rates to break the ECB, Europe\u2019s banks and the offshore (Eurodollar) markets. If inflation gets tamed in the process, that\u2019s nice, but it\u2019s not the primary goal.<\/p>\n Davos\u00a0<\/em>wants an end to the commercial banks, putting all the power in the hands of the central banks, through CBDCs. The Fed and those it represents do not want that.<\/p>\n And given the choice between a recession in the US while scaling back US dollar diplomacy and collapsing into the Eurotrash Communism promulgated by the WEF and\u00a0Davos,<\/em>\u00a0I\u2019m taking the over on the Fed going on the offensive.<\/p>\n Davos<\/em>\u00a0is trying to manufacture recession talk prematurely by attacking the price of oil. Yellen wants a price cap in place by year end to limit the money flowing into the Russian treasury.<\/p>\ncommies<\/s>\u00a0Keynesians now.<\/p>\n\n![\"\"](\"https:\/\/i0.wp.com\/tomluongo.me\/wp-content\/uploads\/2022\/07\/image-8.png?resize=326%2C394&ssl=1\")
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