Measure Twice, Cut Once

You better be sure, Mr. Chairman. April 11, 2024 [WEBSITE]( | [UNSUBSCRIBE]( Measure Twice, Cut Once SEAN RING The saying "Measure twice, cut once" is timeless wisdom, especially cherished by tailors, carpenters, and anyone whose work involves precise alterations. The crux of this saying lies in the gravity of its consequences. In tailoring, it's a stark reminder that a single, irreversible action can lead to wasted materials and time. The same principle applies to life and work, urging us to double-check our decisions and actions to avoid unnecessary setbacks. This proverb transcends its literal meaning, offering a metaphor for life and work: It's wise to be sure before making decisions or actions that can't be undone. It champions the virtue of caution and foresight, encouraging us to consider our actions thoroughly to avoid unnecessary mistakes and do-overs. If only our politicians and central bankers would heed those words. Let’s look at why the Fed needs to be damn sure before it cuts - if it even cuts this year. What Larry Said Former Treasury Secretary Larry Summers, seen in his secret lair high upon the mountains, talked to Wall Street Weekon Bloomberg yesterday. Credit: @BloombergTV Summers said, “In an economy that's growing faster than potential, with an unemployment rate that has a three handle in the presence of massive and growing budget deficits and especially easy financial conditions, the idea that inflation would remain robust or even accelerate should not be a surprise to anyone. And that's what today's data suggests.” I’m not surprised. You’re not surprised. Larry’s not surprised. But, for some reason, everyone inside the Eccles Building seems very surprised. Joe Biden hadn’t winced that hard since he left $85 billion on the ground for the Taliban. How in Sam Hill is the Fed supposed to cut rates to goose the Biden campaign if inflation won’t go away? And inflation isn’t the only problem the Fed has. [Urgent: Claim Your Copy Of This New Book From America’s #1 Retirement Expert!]( Forget everything you’ve ever been told about retirement. According to [this new book]( – written by America’s #1 retirement expert – you don’t have to wait until you’re 65+… and you don’t need millions of dollars. [The strategy you’ll find outlined inside this book]( is completely different… All you have to do is tap into the little-known income streams revealed inside this book… And you’ll learn exactly how you can generate almost effortless income every month… instantly, in some cases! [And today, for a limited only, you have the chance to claim a copy of this book for just $1. Click here now to claim your special book offer.]( [Click Here To Learn More]( Fiscal Dominance Fiscal dominance happens when a government's fiscal policy—the way it spends, taxes, and borrows—overwhelms or dictates the monetary policy set by its central bank. This situation arises when a government has a high level of debt and relies on the central bank to finance its deficit, either through direct lending or by influencing the central bank to keep interest rates low. Here’s the onion: In this scenario, the central bank may find itself unable to implement monetary policy effectively to control inflation or stabilize the currency because its primary aim is catering to the government's borrowing needs. Under normal circumstances, monetary policy should be independent, focusing on managing inflation and keeping the economy stable. However, with fiscal dominance, the central bank might be pressured to print more money to fund the government's deficit, leading to inflationary pressures or even hyperinflation in extreme cases. The concept of fiscal dominance highlights the delicate balance between fiscal policy and monetary policy and the potential consequences when one overshadows the other. Sound familiar? Here’s the fiscal budget deficits - how much more Congress spends than it receives in tax revenue - under Biden, according to the Congressional Budget Office (CBO): - 2021: $3.0 trillion - 2022: $1.4 trillion - 2023: $1.4 trillion (estimated; final numbers aren’t in yet) - 2024: $1.6 trillion (projected) The Fed is Congress’ prisoner. A Hot Jobs Report Let’s head back to Larry, who five days ago on Wall Street Week said this about the jobs market: This was a hot report. Jobs above 300,000, upward revision, strong household survey hours up, payrolls up at nearly a 10% annualized rate. This was a hot report that suggested that, if anything, the economy is reaccelerating. This is very different from what lots of people, most people I think, are expecting and fits the thesis that the neutral rate is much higher than people supposed, and tight money is much less potent than people supposed. Summers continued: My view is that the evidence is overwhelming, that the neutral rate is far higher than the 2.5%, 2.6% that the Fed talks about. That evidence comes from four places. First, we have high interest rates and we have an economy that is, if anything, growing faster than its long-run potential, creating jobs as fast or faster than natural growth in the labor force, even allowing for immigration. Second, we have an economy with financial conditions that are extremely loose, that are actually looser than they were before the feds started the whole tightening process; if you look at credit spreads, you look at the stock market suggesting that in the fullness of it, all financial conditions actually haven't been tightened in an appreciable way. Third, if you look at the market's estimate of the long-run neutral rate as formed by looking at longer-term forward interest rates, that neutral rate is comfortably above 4%. Fourth, if you look at the fundamental determinants of the neutral rate, we have big surges in budget deficits that if anything looks to get worse given the political process. We have big changes in resilience, investment in green investment, in new investment in data centers, along with deglobalization, which may limit capital inflows into our country. So whether you look at the fundamentals, market estimates, financial conditions, or the current strength of the economy, the evidence seems overwhelming that the neutral rate is far higher than the Fed supposes. So you have rampant inflation, fiscal dominance, and a hot jobs market, and you need to cut rates to get your boss back in the Oval Office… unless you want a new boss… who was your old boss? What a mess! Getting Biden Back In If you have time later this morning, read my piece in the Morning Reckoning titled “Powell’s Pickle.” It should be out about 11 am ET. There, I expand on this thesis, with the inflation numbers thrown in for good measure. The Fed Got Pantsed Finally, James O’Keefe, formerly of Project Veritas and now at O’Keefe Media Group (OMG), just caught an economist at the Fed named [Aurel Hizmo]( bragging about how Jay Powell “held the line against, like, Trump.” Credit: [@JamesOKeefeIII]( Who talks about this stuff on a random date? Dumb ass. As our friend Jeff Deist said on Twitter, it’s just one more data point indicating the Fed isn’t a serious organization anymore… and it’s certainly not independent. Wrap Up The economic evidence overwhelmingly shows an economy that, if anything, is overheating from all the spending Congress is doing. Not only that, but the Fed hasn’t tightened as much as we thought. This has created increasing prices, a hot jobs market, and a soaring stock market. Yet, there’s still talk of a rate cut. Why? Because we live in Clown World, folks. In Clown World, there’s a fair chance that despite our 7,000 RPM economy, The Fed will make the political decision to cut rates in a robust economic and market environment. It won’t be June. And maybe not July. But the closer it gets to the election, the more political a decision will look. Unless, of course, we get market turbulence. Then the Fed will ride to the rescue, guilt-free. All the best, Sean Ring Editor, Rude Awakening X (formerly Twitter): [@seaniechaos]( Rate this email Like Dislike Thanks for rating this content! Looks like something went wrong. Please try to rate again. In Case You Missed It… The Club You Ain’t In SEAN RING I can hear philosopher-truck driver John Ring saying: “You can’t fight city hall!” Or, more apropos, would be one of my father’s favorite comedians, George Carlin: Growing up in America, I always believed the playing field was level. I thought my old man was crazy. I thought George Carlin, though one of the funniest men on earth, was jaded. But, as usual, they were right, and I was wrong. Much of this muchness started to happen when the Democrats went from being the people’s blue-collar party to the party of the metrosexual. Once the Democrats realized that you just needed the city vote to control most of the country, it was game over for the grassroots. Across the pond, a similar transformation occurred in England. The ascension of Tony Blair to Prime Minister in 1997 marked a turning point for the Labour Party. It shifted from being the party of the miners to the party of the London multiculti metrosexual, a change that reverberated through the political sphere. Think about it: thirty years ago, could you ever imagine farmers warring with the Leftist parties? And now we’ve got Joke Biden, whose administration is just a walking scandal. But this particular scandal isn’t like the others. [“I Am Deeply Disturbed by the Impending Aftermath of the Presidential Election.”]( No one has been properly warned of the election threat facing our nation – until now. Former White House Advisor Jim Rickards explains the disturbing future that awaits us in November. [Click here](. [Click Here To Learn More]( A Strange Email I can assure you that I didn’t receive this email from the Bureau of Labor Statistics: “Super Users?” The BLS has “Super Users?” What are Super Users, exactly? Super Users The Bureau of Labor Statistics (BLS), a key federal agency responsible for collecting, analyzing, and disseminating essential economic data, has been sharing non-public inflation data with a secret group of Wall Street "super users." These individuals, who receive preferential treatment and insider explanations of where the data may diverge from expectations, have the potential to influence market decisions based on this privileged information. This revelation came to light when the BLS sent the above email to a group of data "super users" explaining a surge in a measure of rental inflation, which left analysts puzzled. The BLS initially tried to clear the confusion with a notice on its website and claimed the email was a mistake. However, it has since been revealed that this was merely the latest lie by a Biden agency. The dissemination of economic information to this secret group of "super users" is likely to prompt a deeper look, as it has implications for how major assets trade and Federal Reserve policy. For instance, if these 'super users' were to act on the non-public inflation data they receive, it could lead to significant market fluctuations or influence the Federal Reserve's decision-making process. The scandal has raised concerns about the transparency and accountability of the BLS, as well as the potential for insider trading or other forms of market manipulation. These actions not only threaten the integrity of the financial markets but also have implications for the average citizen. A select group of individuals' preferential access to sensitive economic data leads to a distorted view of the economy, potentially affecting public perception and confidence in the economy. The BLS still urgently and thoroughly needs to explain the scandal and address the concerns market participants have rightly raised. This incident has starkly underscored the importance of transparency and accountability in disseminating economic data and the critical need for safeguards to prevent the misuse of sensitive information. Who’s Who of Wall Street From [Zero Hedge]( In retrospect, it appears the BLS really did have something to hide, because in a follow up from both the NYT and Bloomberg, we now learn that an economist from the Bureau of Labor Statistics was corresponding on data related the monthly CPI print with major firms like JPMorgan and BlackRock, in what Bloomberg said "raised questions about equitable access to economic information." … The back and forth between the financial firms and the economist "who has been with the BLS for many years" was first reported by the New York Times; as discussed previously, the government bureaucrat sent several emails to a broader group, which he called “my super users” in one of the emails obtained by Bloomberg. The BLS previously lied when it said it doesn’t maintain a list of “super users.” In mid-February, one user asked if they could be added to the “super user email list,” to which the BLS economist replied minutes later, “Yes I can add you to the list.” The move was an attempt by the lowly paid government worker to curry favor with his much better paid peers on the sell- and buyside so that he could, one day, trade the preferential data access for a cushier job in some hedge fund or Wall Street firm. As Bloomberg details, while the recipients’ names were redacted from the request, email signature details or disclosures from their employers were visible in some of the provided records. And in addition to BlackRock and JPMorgan, other banks, hedge funds and research firms — Brevan Howard, Millennium Capital Partners LLP, Citadel, Moore Capital Management, High Frequency Economics, Nomura Securities International, and BNP Paribas — appeared in the exchanges and declined to comment. Pharo Management and Wolfe Research also came up in the emails but didn’t provide comment. Brevan Howard, Millennium Capital Partners LLP, Citadel, and Moore Capital Management are among the largest hedge funds in the world. Wrap Up Never demand fairness because the honest road we take sweetens the victory. At the same time, let’s face it: it’s us against them. And the best revenge we can have is to make as much money as possible to live our best lives. Rude Remnant, let’s make that happen. All the best, Sean Ring Editor, Rude Awakening Twitter: [@seaniechaos]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2024 Paradigm Press, LLC. 1001 Cathedral Street, Baltimore, MD 21201. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. 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