The
Fed and the U.S. Government Can Not be Trusted!
By Victor
Sperandeo with the Curmudgeon
Introduction:
Once again, we probe beyond the headlines to reveal false
promises by the Fed and misleading jobs numbers by the BLS. The chicanery we’ve previously chronicled –
within the U.S. government and its agencies – of reporting misleading
information was in full force last week.
Please email the Curmudgeon (ajwdct@gmail.com) to let us know what you
think of our work. We believe it’s
original and way ahead of the mainstream media/talking heads on TV/Internet.
Fed’s Pledge to Stop Forward Guidance?
In last week’s column, we noted that the Fed
said it would end its “forward guidance” talk about the need for additional Fed
rate increases. Instead, they would be “data
dependent” at each forthcoming FOMC meeting.
However, the Fed did not follow through! As the markets continued to
rally on 8/2/22, comments from Fed officials indicated that additional rate
hikes were planned.
The following Bloomberg article notes how the Fed broke
its pledge to quit forward guidance talk:
U.S Treasuries sank, and
stocks dropped after Federal Reserve officials signaled the central bank is
still intent on raising rates until inflation is under control. Treasury yields rose across the curve, with
10-year rates climbing as much as 20 basis points to 2.77%. The yen, which was
on track for its fifth daily gain, fell as the dollar snapped four days of
losses amid a sudden turnaround in risk sentiment...and fresh commentary
from Fed officials making it apparent that a policy pivot was less likely….
Investors have been keeping an eye out for hawkish comments from Fed officials
about the need for higher rates to restrain elevated inflation.
San Francisco Fed
President Mary Daly said on Tuesday that the Fed is “nowhere near” done
with its efforts to tamp down on inflation, Chicago Fed President Charles Evans
said he expects the pace of rate hikes will start to slow later in the year.
“The Fed is not likely to announce they’re letting up on the brakes at this
point,” said Ellen Gaske, economist at PGIM Fixed Income. “They are still
seeing inflation numbers that have not started to recede.” Cleveland Fed President
Loretta Mester echoed this, saying that she wants to see “very compelling
evidence” that month-to-month price increases are moderating before declaring
that central bank has been successful in curbing inflation.
In a related follow-on CNBC article, Fed Governor
Michelle Bowman said she supports the central bank’s recent 0.75 percentage
point rate increases and believes they should continue until inflation is
subdued.
……………………………………………………………………………………….
Well, if future Fed monetary policy will be “data dependent,”
why are Fed-heads now talking about raising rates before they see the data at
forthcoming FOMC meetings? Note also,
Powell’s flip flop of a 75bps rate hike being “off the table” for the June FOMC
meeting, but Fed Funds were raised by that exact amount in June (and again in
at the July FOMC meeting).
This begs the question: What is a con man? ANSWER: “A
person who tricks other people in order to get their money.”
Therefore, we must conclude that FOMC members are “con
men/women” and liars of the highest degree. Manipulation and propaganda are the Fed’s
specialty rather than honesty and consistency about their decision-making
process.
-->The conclusion is never trust what the Fed says it will do.
Analysis of July Jobs Report:
At first glance, the non-farm payroll numbers
reported Friday by the BLS were shockingly strong. The Employment Survey revealed that
+528,000 jobs were added in July vs. an estimated 250,000 and larger than the
average monthly gain over the prior four months (+388,000).
Economists at Bank of America called the report “a
double-edged sword,” implying lower recession risk but an increased risk of a
hard landing later (due to future Fed rate hikes).
It’s astonishing to us that the mainstream media did not
mention the “Non-Seasonally Adjusted” number of -385,000 jobs lost
in July.
Let’s compare the two: The actual “Non-Seasonally Adjusted”
jobs number was -385,000 vs. “Seasonally
Adjusted number of
+528,000!
Now add the
+309,000 Non-Seasonally Adjusted Birth Death Model (BDM) [1.] of
estimated jobs created and you have an even larger difference between a very
strong U.S. government adjusted report and a very weak one.
Note 1. The Birth Death Model (BDM) consists of made
up, assumed, estimates, but not actually counted jobs. We explained the Birth Death Model hoax in this post.
Other
Voices:
From – "The Forest From The Trees"-- a well-respected
macro service I subscribe to:
After 27 years in this
business, it takes a lot to leave us speechless, but this jobs report did just
that, both because of how good it was and how little sense it makes given the
context of other data, which has been almost uniformly weakening notably.
Add John Williams’ Shadowstats comments:
What was not headlined
in the Payroll Employment “Recovery” was that the seasonally adjusted recovery
gain was just 0.02% (which rounds to 0.0%) or 32,000 +/-116,000 jobs [90%
confidence interval], in the context of heavily shifting and suspect
seasonal adjustment revisions.
July 2022 Payrolls also
held shy by about 3.6% (-3.6%) or by 5.8 (-5.8) million jobs of where they
would be, had the U.S. economy continued its relatively stable trends in place
before the externally driven Pandemic shut it down.
……………………………………………………………………………………………………...
The Bigger Picture in 2022:
For the year of 2022 to date, the BLS reported 2,928,000 jobs
“Seasonally Adjusted” being created vs. 1,897,000” Non-Seasonally Adjusted”
jobs… a difference of +1,031,000 (phantom) jobs.
Add the estimate from the BDM, which was +906,000 estimated
jobs created.
In summary, an average of 418,000 jobs per month were
reported for the first seven months of 2022, but only 129,000 jobs per month
were counted. That computes to 69.14%
fewer jobs added than reported by the BLS.
Obviously, such shenanigans are intended to fool the public
into believing the economy is much stronger than it is.
Implications: The
manipulated job numbers green lights future Fed rate hikes as the “strong job
market” enables the Fed to “safely” disregard the two consecutive quarters of
negative real GDP growth (“technical recession”) this year. Fed rate hikes, and
threats of same, stops any market rallies in its tracks, thereby making the
public poorer.
All this to make the Fed look like its fighting inflation?
More Job-Related Anomalies:
1. The Establishment
Survey and Household Survey on employment show huge discrepancies.
From Zero Hedge:
The closely followed
Establishment Survey came in red hot.
Not only did it soar despite the U.S. entering a technical recession
last week, but it also printed at a 5 month high of 528K, a six-sigma beat to
consensus expectations of 250K..... and with wages also coming in hotter than
expected, rising 0.5% M/M or 5.2% Y/Y, it was enough for many to conclude that
calls of a recession are premature because, after all, you can't enter a
recession when jobs are rising by over 500K.
True... but a problem
emerges for the second month in a row when looking at third-party data which
tracks the number of new employees laid off as well as new layoff events, both
of which have soared since May, yet which have unexpectedly not been
reflected in BLS data.”
In another important
non-sequitur to the strong jobs report, this week the U.S. Treasury said it
would increase its borrowing by $262 billion or 143% vs. expectations in
3Q-2022, in part due to a drop-off in U.S. tax receipts. The latest indications
suggest a drop-off in receipts and higher outlays, the officials said.
The Treasury’s debt
managers now expect to borrow $444 billion in the July-through-September
period, compared with the original estimate of $182 billion. The Treasury left
unchanged its cash-balance estimate for the end of September, at $650 billion.
One must ask what happened to the federal income taxes
from the 528,000 new jobs created in July?
ANSWER: Since 385,000 jobs were
really lost so tax receipts declined!
Current Fed Funds Rate of Change Defies History:
We suggest readers view the excellent commentary (with a
couple of great charts) shown by Mike Maloney in this video.
“Interest rates are something that should be set by the free market,” he says
(11:06 minutes into the video).
Here’s a chart of the Fed Funds Effective Rate from
1954 to 2022.
And a more alarming chart of the PERCENTAGE quarterly
change of the Fed Funds rate:
“We only one time exceed a 100% change… till now. In the last quarter it was + 525%. There has never been anything like this,”
Maloney said.
This begs the question of why has the Powell led Fed, just
increased the % RATE OF INCREASE IN FED FUNDS by 4.2 times the previous largest
increase in almost 70 years? Could it
have something to do with the November mid-term elections?
Victor’s Conclusions:
The U.S. is in deep decline in so many respects that there
are too many to list. (Please read my
previous opinions on this at fiendbear.com) The loss of power for the
Democrats will be massive if the November mid-term elections are honest?
If the people accept this form of Government, we are truly
serfs and slaves.
End Quote:
“Accepting fraud from our leaders means accepting fraud in
our personal lives.”
Be well, stay healthy, try to find diversions to uplift your
spirits. Wishing you peace of mind, and till next time………
The Curmudgeon
ajwdct@gmail.com
Follow the Curmudgeon on Twitter @ajwdct247
Curmudgeon is a retired investment professional. He has been involved in financial markets since 1968 (yes, he cut his teeth on the 1968-1974 bear market), became an SEC Registered Investment Advisor in 1995, and received the Chartered Financial Analyst designation from AIMR (now CFA Institute) in 1996. He managed hedged equity and alternative (non-correlated) investment accounts for clients from 1992-2005.
Victor Sperandeo is a historian, economist and financial innovator who has re-invented himself and the companies he's owned (since 1971) to profit in the ever changing and arcane world of markets, economies, and government policies. Victor started his Wall Street career in 1966 and began trading for a living in 1968. As President and CEO of Alpha Financial Technologies LLC, Sperandeo oversees the firm's research and development platform, which is used to create innovative solutions for different futures markets, risk parameters and other factors.
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