As you know, there is hardly a day when I don’t fire some shots towards #FED Jerome Burns. However, it is becoming evident that his powers and degree of discretion are equivalent to those of a cloth puppet. I wonder whether Jerome ever imagined being in his current position 10 years after accepting the invitation to join the #FED from President Obama in 2012. I believe what a wealthy and seasoned private equity professional was looking for at that time was to end his career in a prestigious, even if not remunerative, government job to “give back” to the community after many years spent profiteering from it. Fair enough.
There are some elements of financial markets that cannot be predicted using charts, formulas, or models, but can to a certain extent be predicted using game theory techniques.
Did he run for the Chairman role? I don’t think so, but he was the obvious Republican pick to replace Janet Yellen at the #FED in 2017. It didn’t take too long for Jerome Burns to show his true nature and quickly backpedal from increasing interest rates in 2018 after President Trump threatened to fire him (even though he did not have any constitutional power to do so) and bank CEOs gave him (a lawyer) a fast-track training on markets and what happens to them when you try to tighten liquidity from ultra-leveraged financial institutions.
From that moment, Jerome Burns’ stream of decisions and actions as #FED chairman became questionable, to use a euphemism, and somehow all of them were consistently beneficial to the stock market and financial assets in general at the expense of the real economy and taxpayers.
What we have been living in the past few weeks is the apotheosis of the #FED insanity. How on earth can you still leave the door open to rate cuts this year with all that is happening? Are you simply nuts, dishonest, morally corrupt, or simply serving other interests that clearly clash with the #FED mandate of fostering a stable and healthy economy?
Jerome Burns was expected to go live on the “60 Minutes” show last Sunday, but he (conveniently) caught COVID and had to cancel it. What if Jerome Burns simply had enough and wanted to get back his last name and be called again Jerome Powell?
If you apply game theory to Jerome Powell’s current situation, he is set to face a greater “reputational loss” in any future outcome, but if he resigns, walks out the #FED, and slams the door behind him. Considering his only, or surely main, reason for joining the #FED more than 10 years ago was to navigate towards his retirement leaving a good strong memory of him as a late civil servant, I personally won’t be shocked to see him getting on one of the last lifeboats available in the sinking #FED Titanic.
How would the market react if Jerome truly shocks everyone and bows out from the “clown show” he is forced to perform in? After a first negative reaction, I think markets will actually rally. Do you know why? Surely any administration in charge will appoint a “Modern Monetary Theory” advocate that will start monetizing US Debt without second thoughts under the false conviction they can print an infinite amount of money with little downsides of doing so compared to the massive upsides. Do you think I am joking? Watch this clip here and you will see I am not.
What’s going to be the end game of all of this? I believe a picture from Weimar Times is more powerful than a thousand words needed to explain it.
As I wrote a while ago, THE WORLD ECONOMY DESPERATELY NEEDS A NEW PAUL VOLCKER , however, I am really worried that type of person has gone extinct.
If I was him I would bail out. Find a “family reason” and flee the burning Eccles Building as fast as possible. Jawbone the system and the markets on the way out and as long as possible after getting safely distanced. Hire a PR company to puff up his legacy and reduce any “reputational loss”. Suck up speaking fees while the iron is hot and make sure your piles of physical gold are held in private vaults in Singapore..