The Contrarian

“In the investment markets, what everyone knows is usually not worth knowing.”

The Fed: Should Yellen Be Fired?

The headline is an important question and it’s not unreasonable. Is she a shill for the extreme left? Does she know what is going on in the economy? She said she would serve out her term as Fed Chair. That expires in January 2024! A person can do a lot of damage in that time. Here is what an excellent analyst writes about her and the Fed.

From Phoenix Capital, Graham Summers

Trump might want to put a call in to Janet Yellen. The Fed is supposed to be a neutral, independent entity. However, that myth went out the window when Bernanke “gifted” QE 3 to Obama in 2012 to aid with the latter’s re-election bid.

The Yellen Fed seems to be even more committed to defining the Fed as nothing more than a leftist establishment mechanism. Back in October when it still looked like Hillary Clinton would win the 2016 Presidential election, Yellen commented that she was considering letting the economy run “hot” meaning allowing inflation to rise without implementing additional rate hikes.

One month later, Donald Trump won the Presidency and Yellen announced she wanted to hike rates in December with three more additional hikes in 2017.

Now, 3Q16 growth was supposedly 3.5%. If that had been true, then Yes, the Fed should consider hiking.

However, since that time GDP growth has collapsed. 4Q16 growth came in at a measly 1.9%. And 1Q17 GDP growth has collapsed from a forecast of 3% in early February to 1.2% today!

And Yellen is still pushing to hike rates.

So, back in October, when the economy was supposedly growing at an annualized rate of 3.5% Yellen wanted to let the economy run “hot.” And now that the economy is growing 2% rate (and soon to be sub-1% rate based on projections) she wants to hike rates multiple times.

Let that sink in for a moment.

It is very difficult to look at the above and not come to the conclusion that Janet Yellen is actively trying to thwart the Trump Presidency. For 8 years under Obama she signed off on maintaining interest rates at zero, permitting the debt to double.

Now that Trump is in office, Yellen wants to hike rates 4 times in 12 months (note: although she seemed to insinuate 2-3 hikes…) And she’s begun worrying about debt levels in her speeches.

Our view: She should worry about all the Treasury debt the Fed has bought, several trillion dollars worth. How is the Fed going to reduce those holdings without crashing the bond market. Probably, they see no reason to just letting it grow if necessary. It’s worked so far. The debt has grown from a little more than $400 billion to over $2.5 TRILLION in just 7+ years.

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