Janet is having a big week and it's only half over. Monday she was out there arguing the case for more bank capital which is wonderfully politically correct but hardly useful in the prevention of another 2007/08-like event. In fact it does more harm than good in making people believe they are safer, but the art of make-believing as we wrote yesterday is what it sees to be about these days.
Today, she took it a step further. If you didn't believe me when I said at the time of her nomination that she was a bigger dove than Bernanke, her comments today proved that to be true…in spades. Janet made in quite clear that the Fed's free money policy will not change for at least two years, stating that she is less than happy with the rate of economic growth although things were getting better which indicates a nuance that I can't understand. Janet seeds no inflation: indeed, she bemoans the fact. Of course, any question as to whether the inputs to the CPI should be examined will not be appreciated, but in keeping with the policy of creating any data that is needed we shall pass that by. Janet is into her Part II of her dual mandate, namely keep the economy running and full employment in spades, far surpassing her predecessor in this regard. Of course, while tacitly admitting the economy stinks and in the face of everybody now recognizing that all the employment numbers are rubbish, one might ask "why?" and I wouldn't have an answer except she thinks that it's her job.
Hey, hold on, one might say, where is the administration in all this? No where of course, except on the endless campaign trail trying to re-elect the party in order to continue the policies of the past five years. The sad part is--and beginning with Greenspan--we have allowed our politicians to foster the belief that it IS the Fed's job to run the economy! Call me old fashioned, but if that is the case why don't we just cut the Federal government in half and sit back and relax. Oh, and institute direct elections for the Fed Chairman as well. Meanwhile, out here in fly-over land, we take note of actions of our politicians like this one that came to light last week.
The Farm Bureau has just instituted a new policy to make life better--and safer--for all. In a few short months, the used grain resulting from the making or beer will have to be cleaned, dried, purified and bagged to be sold as pet food before it can be fed to cows. Now the fact that the used grain has been fed to cows since the Egyptians started making beer and that the farmers gave it away thereby reducing everyone's cost doesn't seem to matter. The Farm Bureau is supposed to create regulations which save us from ourselves and by the by, create a new product which can be taxed. We have a lot of cows out here. Janet should come visit if she wants to see how things work--and don't work-- in the real world. Anyway, keeps those rates at zero my girl and keep feeling good about yourself. Just don't make the mistake that you are accomplishing anything.
Meanwhile, Over There, the Euro Parliament has created a "banking union" which supposedly brings all the banks in the Eurozone under one umbrella and subjects over 100 of the largest to direct supervision by the ECB. I don't have enough details to comment fully, but be aware of one salient fact in all of this. Practically all of Europe, especially the governments is financed by the banking systems. Or sure, governments issue bonds but they are bought overwhelmingly by banks. There is no capital market as we know it. See the problem? You think a French finance minister is going to allow an Italian-born Central Bank President, under constant pressure from the Germans to control his funding source? Think about it. More when I figure it out.
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