These Days I'm not sure who gets more media attention, Bill Dudley of the New York Fed or Kim Kardashian. Mind you Ms. Kardashian has a lot behind her but it seems that Billy the Dud has more to say. He was at it again last Friday as reported today in the New York Times. Full disclosure: I was brought up to believe that, like children, Central Bankers better being seen but not heard. Oh sure, the head of the Fed has to make regular reports to Congress, but the President of the NY Fed would, upon the rare occasion say something meaningful if events called for his utterance, but generally speaking, he would say nothing...certainly nothing meaningful for long stretches. Billy the Dud has turned that on it's head. He says a lot anytime he's withing ten feet of a reporter and none of it is meaningful. In fact most of it leaves one searching for reality. At least, up to now, he's kept his clothes on (shudder).
Today's interview was the latest chapter in the, "I'm OK, you're OK" litany that has been spewing out of Liberty Street for months. I quote from the Times: "He described the global situation as 'Dramatically better, and said that financial conditions have eased considerably." He continued, "I would say at this point I don't see a lot of things that disturb me."
Now I have taken this out of context but have done so because those comments are the headlines makers along with his stated belief that, "the Fed is on the right path." I spoke with a guy who knows Billy D. pretty well for a long time going back to his Goldman Sachs (funny how they always pop up) days. Comment? "He's lived within the Fed all his professional career as a Fed Watcher economist at Goldman and now inside the same institution." The outside world has never really concerned him."
Mind you, having dodged a bullet in 1008/9 he may be speaking purely in relative terms, but the thing about this business is that you never really see the Black Swan until it swims up for a hand-out: don't worry about them, simply know they exist and be ready to act. But it's the things you do see and ignore or choose to ignore because it doesn't fit the pre-determined scenario, the particular mind set of the moment, or because having gotten lucky you begin to confuse that with being so smart as to never be caught out again. So, if Billy is listening...
In the period of 2008/9, the crisis was severe but there were a lot of people around who had seen its like before and pretty much knew what had to be done--as unpalatable as it might have been--to stabilize the system. It worked. We are good at crisis management and there were a few people in D.C. and in New York who were VERY good at it. Since then, nothing the Fed has done has had any real beneficial effect at all; indeed, its actions have created false hope and worse, false markets. To an extent that Billy doesn't realize, it has, through its actions served to destabilize the markets and encouraged others to take the same foolish path...witness Japan..
The economy is lousy...not in collapse mind you, but lousy. The true engine of growth is the private sector and despite all the claims of success the number of people employed in the United States today is pretty much the same as in 2007...except our population has grown by 30 million.
Debt has increased enormously. Forget about Little Paulie and people who speak of the ownership of the printing press. Corporate debt has exploded as well as personal debt in relation to autos and real estate. This stuff is real; it has to be repaid and it is entirely the result of Fed policy.
Billy's bud, Jacob/Jack is off in Puerto Rico today. Bit of a debt problem there as we know. Now why the damn fool went to P.R. in May at the 11th. hour is beyond me. It's not like he needs a break in room rates: he should have gone in February when it might have done some good AND when the weather stinks in D.C. Rookie mistake. BUT, as Il Duce is fond of saying, "Make no mistake," this P.R. thing is a mess and could very well get worse and the timing is all wrong. The is a payment of general obligation bonds due July 1. If they are to collapse, that is just about the time the Greek negotiations will collapse. Not good.
If Billy missed it, the BREXIT vote is too close to call. I'm sure, the United States having advised the British people that it would not be in their interest to vote "yes," that he is convinced that the result will be "no." Hope he's right.
And speaking of Europe, the recent upturn in economic numbers was a head fake. The continent (read, Germany) is down again and the UK is falling backwards. European banking is not back and DeutschBank is awful. All will be saved if necessary but at what cost both in a financial and political sense? And oh, Sr Draghi has all but admitted that nothing he does seems to work but he'll try a bit more of the same. Boy's got game. And today the Austrian P.M. resigned over the immigration mess further clouding the political interplay which in itself could affect the BREXIT vote.
Japan...well, Japan. Mr Abe announced today that Japan will intervene if the Yen continues to appreciate. Super! A good ol' currency war! In an election year! Spoken with your markets group lately?
And last, but certainly not least is China. There were many, myself included that felt the Chinese were smart enough to get a lid on this thing. Again, this is going to be a close call but the betting line now favors a considerable amount of financial blood being spilled, the ramifications of which throughout all of Asia really cannot be determined. Anyway, I just thought I'd supply a bit of food for thought for Bill which, if absorbed, might even supply grist for the mill of his next interview which, if he sticks to his schedule, should occur in about three days. He might even consider a joint effort with Kim...perhaps in Puerto Rico...on the beach...to draw attention to.......nah, bad idea.
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