Following Great Jobs Report, Fed Chair Says He’ll Be “Patient” Before Raising Rates Further

The jobs report issued by the Department of Labor on Friday was unequivocally positive. Every sector of the economy, save one, saw robust gains in employment, with 312,000 new jobs created in December beating forecasters’ predictions by 30,000 jobs. In addition, the DOL revised October’s and November’s numbers upward by 58,000 jobs. Even the rise in the unemployment rate from a record low of 3.7 percent to 3.9 percent was explained by the number of new people entering the job market.

The number of unemployed workers dropped by 300,000 over the last 12 months, while the labor participation rate jumped. Wages improved as well as employers were forced to bid higher for a shrinking pool of workers to fulfill vacancies. Especially notable was the jump in the percentage of working-age Americans employed, which hit a five-year high.

Year-over-year, employers added 220,000 jobs a month in 2018, compared to just 182,000 jobs monthly in 2017. And this in a supposedly “tight” labor market. In December every private-sector industry except information technology added jobs, with some of the biggest gains coming from construction, education, and health services.

Fed Chair Jerome Powell (shown) commented on the jobs report at an economic conference in Atlanta on Friday morning, admitting that it reflected a growing economy. As for raising interest rates further in 2019, Powell backed off, saying, “With the muted inflation readings that we’ve seen coming in, we will be patient as we watch to see how the economy evolves.” But then he added that he and his board will be prepared to “shift” Fed policy over interest rate hikes and the continuing “runoff” of bonds from its balance sheet “significantly, if necessary” to pursue its goals.

As this writer has taken pains to show, those goals go far beyond its mandate to “maximize economic growth while keeping inflation in check” (source: the Chicago Federal Reserve Bank). As noted at The New American on Thursday, Powell is the handmaiden of the international banking establishment and has clearly been instructed to slow the Trump economy sufficiently to keep the president from winning reelection in 2020:

If, as we have surmised repeatedly, the Fed’s purpose is to slow and then eventually stop the Trump economic juggernaut just in time for the 2020 presidential election, then it is working. Goldman Sachs has just reduced its growth outlook for the first half of 2019 from 2.4 percent to two percent, and the bank expects growth to slow further in the second half of the year to 1.8 percent.

Morgan Stanley, another insider bank, expects the economy, thanks to the Fed’s interest-rate hikes and its continuing “autopilot” liquidation of its bonds, to slow to 1.7 percent this year, with quarterly growth declining to just one percent in the July to September quarter.

It’s helpful to remember that the Fed is the brainchild of the international banking establishment, as so carefully revealed by G. Edward Griffin in his tome The Creature from Jekyll Island. As part of the Deep State, why would globalists not direct Powell to slow Trump’s economic recovery and stall it just in time for his reelection campaign?

As for Powell’s words, they comforted investors on Wall Street, who jumped upon hearing what they wanted to hear: that he was going to back off on raising interest rates for the time being and that he might even consider slowing his ongoing “runoff” of maturing bonds that has been starving the economy of liquidity. But a look at what is happening to the Fed’s balance sheet reveals that Powell’s words are just that: words. The “runoff” on bonds has shrunk the Fed’s balance sheet by $435 billion in the last 12 months, from $4.5 trillion to just over $4 trillion. That’s 10 percent shrinkage as its policy of “quantitative tightening” continues into the New Year.

As Economy Slows, Bond Investors Say Fed Won’t Raise Rates

A month ago, bond investors were predicting that the Fed would be raising interest rates several times in 2019. As the economy is now clearly slowing, those same investors are predicting the Fed has now done its job and won’t be raising rates in the New Year. Said the Wall Street Journal:

Fed-funds futures, which investors use to bet on the direction of Fed policy, on Wednesday showed a 91% probability that the central bank’s policy makers will finish the year [2019] with interest rates at or below their current levels.

That is a reversal from early November, when futures prices indicated a 90% probability that rates would end 2019 higher than they are now.

The latest report from the Institute of Supply Management merely confirmed that slowing economy, with its manufacturing survey published on Thursday coming in below forecasters’ expectations (which were below October’s).

The New American has been tracking and noting the slowing of the U.S. economy that has been established policy at the Fed for many months now. In November we noted that homebuilders were already feeling the pinch of higher interest rates, which the Fed had imposed on the economy earlier in the year. The NAHB (National Association of Home Builders) monthly confidence index dropped a staggering eight points from October, providing an “early warning signal on the direction of the economy” and running the risk that the Fed “might just be steering the economy off the highway and into the weeds.”

A few days later The New American reported that our position that the Fed’s intervention was intentional and deliberate was confirmed by Jeremy Siegel, professor of finance at the Wharton School of Finance. He told CNBC’s Closing Bell on November 21 that “the market is saying that the pace [of the Fed’s interest rate hikes] is a little too fast.… The market is clearly worried about over-tightening by the Fed.” We noted remarks by Fed Chairman Jerome Powell made in October that the Fed was “a long way from ‘neutral,’” implying that more rate hikes were in the plan in order to slow the economy.

In December The New American warned its readers not to be fooled into focusing only on the proposed interest-rate hikes the Fed was using to slow the economy but to also focus on the “runoff” of billions of dollars of bonds it was holding as they matured. At the time we said:

Since September 2014, the Federal Reserve has been intentionally and deliberately shrinking the money supply — the capital that a capitalist system needs to thrive and prosper — from $4.15 trillion to $3.5 trillion as of November 21, 2018. That’s 15-percent shrinkage in the “oxygen supply” the capitalist system needs.

But it’s worse than that: Most of that shrinkage has taken place since last September. Since then the Fed has reduced the money supply (its “Adjusted Monetary Base” numbers are available from the St. Louis Fed’s website) from $4.0 trillion to $3.5 trillion, a reduction of 12.5 percent.

That money-supply shrinkage is now showing up in the various places pundits are looking to place the blame, i.e., anything that affects the financial well-being of the economy. As interest rates rise and the money supply shrinks (the two most powerful tools the Fed is using to slow the economy), housing starts slow, car sales dwindle, credit card payments increase, profit margins decline, and capital expenditure projects are taken off the board as they are no longer profitable enough to be justified….

It’s the Fed that stands athwart the economy’s startling growth trajectory.

A week later, we noted a reversal by bond investors who saw a slowing economy and changed its mind about the Fed’s continuing efforts to slow it further: “The Fed was expected to continue raising rates well into 2019 but now futures traders (those who bet real money and not just ink on Bloomberg’s website) are backing off. They are betting that the Fed might raise interest rates one more time next year (instead of the three to four times experts were predicting just a month ago) and some are putting large sums down on the bet that — ready? — the Fed will reduce interest rates by one notch next year instead.”

Tax Attorney: Social Security Participants About to be “Disenfranchised”

If Rebecca Waiser is right, millions of Americans are about to be “disenfranchised” of their Social Security benefits. Waiser, a licensed tax attorney and certified financial planner writing for Fox Business, says the math is incontrovertible and irreversible.

According to the trustees running the program, Social Security will be forced to start cutting benefits by 2034, 15 years from now. According to Waiser the crisis will hit in three years.

Wrote Waiser:

Disenfranchisement … is defined as the state of being deprived or a right or privilege … [but, as] the Supreme Court ruled in the 1960 case Flemming v. Nestor … the receipt of payments from the program is not a “right,” even where the participant had paid into the system for years.

And since Social Security instead is a privilege, “the reality is that most Americans count on and expect that ‘their’ Social Security … will be there for them. But it will not.”

First, there is no money in the Social Security trust funds, just government IOUs: “There is no actual money in the fund, just the special-issue Treasury bonds, which are in fact government IOUs. The real surpluses have been used by the federal government as a funding source for many things.”

Translation: The payroll taxes received were spent by the government long ago. But now that the program’s benefits being paid out are greater than the payroll taxes it receives, those IOUs are being redeemed by the Treasury, thus adding to the federal government’s annual deficits.

And the demand for those benefits is about to explode. There’s a tsunami of Baby Boomers about to apply for them, wrote Waiser: “About 70 percent of the Boomers [approximately 76 million people] have not even begun to retire yet. Beginning in 2022 the bulk of that generation will retire [over the next] five to seven years.”

And when each person retires and starts to claim benefits, there’s a “double negative” hit to Social Security: he or she stops paying into the system and instead starts taking out of it. And, according to Waiser, there’s another problem: “the lower birth rates of Gen X and Millennials [those paying into the system that’s keeping it afloat] does not help.”

Waiser is out of solutions: “It is clear that the proverbial can cannot be kicked down the road any longer. The road is ending, and the cliff lies dead ahead just like the iceberg … for the Titanic.” She added, “We cannot borrow our way out. As I see it, it is a mathematical certainty that benefits will be cut … and taxes will go up.”

The tsunami to which Waiser refers will be even larger thanks not only to deficit spending by the federal government and its borrowing, but also to the interest costs in servicing that ever increasing debt. At about the time Waiser’s Baby Boom tsunami hits, the U.S. Treasury will be faced with making interest payments that exceed the country’s military budget. Somewhere along the way those investors, bond holders, and foreign central banks which have up until now been such willing buyers of U.S. Treasuries will turn off the tap.

All of which is likely to be a surprise to the average American worker. Last April Gallup interviewed 1,150 of them age 18 and up and learned about the fantasy land in which they live. According to Gallup more than half of them approaching retirement “project financial comfort in retirement” while nearly eight out of ten already retired “say they have enough money to live comfortably.”

Another Gallup poll conducted at the same time revealed that, on average, a worker approaching retirement plans to retire at age 66.

But the reality of the average recipient of Social Security retirement benefits shows a much different situation. According to the Social Security Administration, 61 percent of retired workers count on their Social Security check to provide at least half of their income. For unmarrieds, that figure jumps to 71 percent.

When that tsunami hits in 2022, it should be blindingly clear to even the densest politician that something will need to be done. He or she will be hearing from the voting bloc most intimately affected: the early Boomers already on Social Security, and the Silent/Greatest generation (71 and over). That bloc, according to Pew Research, is large and powerful, and will hardly stand by while their Social Security benefits are being threatened.

So the ultimate solution — benefit cuts and payroll tax increases — will fall where it always falls: on those in the system with no way to get out. As Waiser concluded: “the coming ‘disenfranchisement’ of Social Security [will deprive] Americans … of the privilege of the full benefit payments upon which they were counting. It’s no wonder that Congress has expressly reserved the right to alter, amend, or repeal any provision of the Act.” (Emphsis added.)

The intergenerational conflict built into the failing Social Security system is about to heat up.