RFK To Jay Powell on Day #1: You’re Fired!

RFK has pointedly announced that he will pardon Deep State prisoner Julian Assange on day #1. That sent a powerful message that the destructive rule of Washington’s bipartisan War Party will be brought to an abrupt end if he is elected President.

Likewise, RFK should announce an intent to stop dead in its tracks the Fed’s egregious servitude to Wall Street and the one percenters who luxuriate in the massive inflation of financial assets it enables. Pledging to hand ex-private equity impresario, Jay Powell, his walking papers on January 20, 2025, would give forceful expression to that intent.

At the substantive level, three policy markers could further convey that a sweeping regime change at the nation’s central bank is coming down the pike—changes that would liberate the Fed from the grip of Wall Street speculators and Washington spenders alike:

• Enactment of an extended moratorium on any further Fed purchases of US Treasury or Federally guaranteed debt.

• An end to Fed bailouts, interest rate subsidies, stock market puts and any other open market manipulations on Wall Street.

• Return to a discount window-based modus operandi as provided by the Fed’s authors, where member banks needing liquidity can get Fed advances against sound commercial collateral at market rates of interest plus a penalty spread for using the public credit.

These measures would kill two very bad birds with one stone. Without the prospect of the Fed’s false bid for government debt, bond yields would rise sharply and the warmongers and big spenders on both ends of Pennsylvania Avenue would finally be faced with the true economic cost of their profligacy.

At the same time, a sharply higher bond yield would put the kibosh on the gigantic stock market bubble that has massively shifted wealth to the tippy-top of the economic ladder. Since 1989, for example, the net worth of the top 0.1% has soared from $1.8 trillion to just under $20 trillion. That’s a gain of $38 million per household. 

By contrast, the aggregate net worth of the bottom 50% or 66 million households has risen from $0.7 trillion to $3.6 trillion. That’s a gain of just $44,000 per household.

Accordingly, the top 0.1% gained 1,500X more net worth each than the bottom half of America’s households. And that lopsided outcome was not due to the fact that the top 0.1% was much richer to begin with.

In fact, the aggregate net worth of the top 0.1% was 2.45X that of the bottom 50% in 1989, but by Q3 2023 it had grown to 5.45X. But that shift had nothing whatsoever to do with merit, investment prowess or contribution to American economic life. It was simply a product of financial asset inflation and the ready ability of the very wealthy to speculate with the cheap leverage supplied by the Fed.

In short, the drastic widening of the wealth gap depicted in the chart below was not the natural outcome of free market capitalism functioning on the basis of honest money. Instead, it was a product of the rampant money-printing by America’s rogue central bank—a state institution that has been taken over by Wall Street lock, stock and barrel.

Net Worth Of Top 0.1% Versus Bottom 50%, 1989 to 2023

The reason Powell needs to go, of course, is that he has now proven in spades he is clueless about the real impact of the Fed’s endless flood of cheap credit on Wall Street. The latter, in turn, has been driven by the sheer insanity of its 2.00% inflation target, and the license it gives the Eccles Building to print money with reckless abandon.

Over the last several decades the Fed’s excuse has been either that inflation was missing its 2.00% target from below or that any temporary inflation flare-ups were transitory and would be soon getting back into the target range. Accordingly, the Fed never stopped printing fiat credit, raising its balance sheet from $200 billion in 1987 to $9 trillion at the peak in 2022. That 45X gain in central bank money massively exceeded the mere 5X rise in national income (GDP) during the same period.

That lopsided ratio alone says that the Fed’s printing presses need to be put on idle for a good while to come. Yet at Wednesday’s presser Powell implicitly affirmed that Wall Street will soon get a new flood of money, with at least three rate cuts (75 basis points) later this year. And that’s notwithstanding the fact that after family budgets have been clobbered by 20% higher prices since early 2021 the monthly inflation data in January and February was still coming in well above the Fed’s dubious 2.00% target:

The Fed won’t ignore bad news, but it also won’t overreact, he said. “They haven’t really changed the overall story, which is that of inflation moving down gradually on a sometimes-bumpy road toward 2 percent,” Powell said.

But here’s the thing. There is not a shred of evidence that 2.00% inflation does anything at all to benefit the main street economy or middle- and lower-income households. As we have demonstrated repeatedly, real economic growth rates, investment levels, productivity gains and middle-income living standards have all faltered badly relative to historical trends since the Fed went into heavy-duty money-printing during the Greenspan era.