The Fed's 2018 New Year's Resolution

George Yacik - Contributor - Fed & Interest Rates

In February Jerome Powell takes over as chair of the Federal Reserve, succeeding Janet Yellen. His first order of business should be to get the Fed off its silly, outdated and nonsensical monetary policy target of 2% inflation. He and the other members of the Federal Open Market Committee should at the very least change the inflation target number, or, better yet, find a different measuring stick altogether.

One of the Fed’s mandates, we know, is to keep inflation “stable,” as noted on the Fed’s website, citing the Federal Reserve Act (the other two mandates are achieving maximum employment and moderate long-term interest rates). The current Fed has taken to defining price stability as 2% inflation. Given that the Fed already basically believes it has accomplished the other two objectives, and price inflation has been nothing but rock-solid stable for several years, it’s not clear why it’s still so determined to get inflation up to that 2% target rate, and letting that dictate its monetary policy. If prices are stable at about 1.5%, rather than 2%, doesn’t that meet the mandate, as long as prices are stable?

During the Great Depression of the 1930s the lack of inflation – more accurately, deflation – was a big problem, feeding the downward spiral in the economy for more than ten years. Since then, economists, both on the Fed and elsewhere, have been absolutely terrified of that happening again, even though we haven’t come close to it, not even during the depths of the recent Great Recession. Now that we have seemed to have finally pulled out of the last financial crisis, it’s time to put that deflation obsession to rest. Continue reading "The Fed's 2018 New Year's Resolution"

Trump: Bad Bankers Beware

George Yacik - Contributor - Fed & Interest Rates

So now President Trump has thrown himself into the discussion about Wells Fargo. Maybe now the bank will get the justice it deserves. And maybe now the message about Trump’s intentions about financial regulation will become less fake.

First a little background. Three months ago Federal Reserve Chair Janet Yellen made some pretty startling comments for a Fed chief, publicly criticizing Wells’ behavior toward its customers as “egregious and unacceptable.”

She was talking, of course, about the bank’s years-long practice of signing up its customers for checking accounts, savings accounts, credit cards and other products without asking their permission or even telling them. But since then there have been reports and admissions by the bank of several other excesses, such as charging auto loan customers for insurance they didn’t ask for, dunning mortgage customers for interest rate-lock extension fees when the bank itself caused the delays, overcharging military veterans on mortgage refinance loans, and allegedly closing customers’ accounts without telling them why it did so.

You would think that the Fed – which regulates Wells and other big banks – would have come down on the bank by now. Yet nothing’s happened since Yellen made those comments.

Then last week the president injected himself into the fray. Continue reading "Trump: Bad Bankers Beware"

Going Rogue

George Yacik - Contributor - Fed & Interest Rates

A couple of months ago I wrote about the incredible arrogance and chutzpah of the now-former director of the Consumer Financial Protection Bureau, Richard Cordray.

“In a country loaded with way too many arrogant politicians and government officials who think they are above the law and normal standards of decency, Cordray has set the bar pretty low,” I wrote back then. “Few public officials have shown the level of contempt for legitimate questioning from Congress, the White House and the industries his agency oversees than Cordray has shown since he took over the CFPB, and it’s only gotten worse in the past few months as his tenure winds down.”

It turns out that I grossly underestimated just how devious and cynical he can be. Continue reading "Going Rogue"

Oil Market Waiting For A Catalyst

Robert Boslego - Contributor - Energies

On November 15th, Saudi Energy Minister Khalid al-Falih said, “We need to recognize that by the end of March we’re not going to be at the level we want to be which is the five-year average, that means an extension of some sort.”

He went on to say that Saudi Arabia favors making an extension decision at the OPEC meeting at the end of this month. “My preference is to give clarity to the market and announce on November 30 what we’re going to do.”

At the conclusion of the last OPEC meeting in May, the Saudi minister had stated that the current production quotas will “do the trick” of rebalancing stocks to normal levels within six months. Earlier this month, the DOE projected that global OECD stocks at end-2017 would be right where they were at end-2016. And it projected that 2018 inventories will be higher, not lower.

Russia’s continued participation seems to be a linchpin, and the Russian energy minister, Alexander Novak, reportedly met with Russian oil producers about their view of extending the production deal. According to TASS, everyone but Gazprom Neft agreed to a six-month extension, not the nine-month extension favored by Mr. Al-Falih. Gazprom Neft expects to launch new projects in 2018. Continue reading "Oil Market Waiting For A Catalyst"

Copper Update: 1-Year After The Election Of Donald Trump

Aibek Burabayev - Contributor - Metals

American Dream

One year has passed since President Donald Trump was elected to office. That month I wrote a post about copper’s ultimate monthly performance compared to other commodities thanks to the new president’s promises of huge infrastructure rebuilding.

Below is a 1-year performance chart of copper to see how the metal has been doing since Election Day.

Chart 1. 1-Year (from November 8th, 2016) Copper Performance

Cooper Performance One Year
Chart courtesy of

Cooper gained a hefty 25% for the period with a peak of around 33% that it hit last month. In the post-election months copper exploded to the upside, but then the euphoria in the market was changed with profit taking erasing earlier gains. Continue reading "Copper Update: 1-Year After The Election Of Donald Trump"