The emperor has no clothes.
Who is the emperor?
The Fed. And the media is their most effective weapon. When creating bank reserves is just not enough to reach its goals, the Fed uses misinformation strategies to fulfill its objectives.
We have been led to believe the Fed is powerful, that it supports the market, creates inflation, and increases or decreases the unemployment rate. It is an entity that can do almost anything by means unrelated to its results.
However, the Fed cannot even deliver its promises. Its balance sheet (BS) from 2004 to 2020 went from $2 trillion to $7 trillion. The Consumer Price Index (CPI) during the same period went from -4% to 6%, nowhere close to its 2% inflation target.
For over a decade, the Fed failed to reach its 2% inflation goal, even when estimated with its measurement (CPI).
So why should we believe anything Jerome Powell says about inflation?
It doesn’t make sense.
The Fed has several tools to handle inflation such as IOER or Quantitative easing, but the only trick it has up its sleeve is creating or destroying bank reserves.
The diagram above represents how the Fed used to manipulate interest rates before the GFC back in 2008. Even the effectiveness of this system was debatable. There are two balance sheets: One for the Fed and another one for the commercial banking system (CBS).
Please keep in mind that the banks and the Fed can lend to each other overnight.
If we start with liabilities and assets of the CBS, treasuries, and reserves are what the Fed’s fund rate tries to target.
The Fed has treasuries as assets on their BS and the bank reserves on the commercial banking system BS are liabilities for The Fed, which is their only hitch. The only way they have to keep interest rates above zero is through Interest on reserves (IOR) or overnight reverse purchase agreement rate (ON RRP).
According to their website:
The Fed uses its monetary policy tools to influence the supply of money and credit in the economy. It does this primarily by using daily open market operations. When the Fed buys or sells U.S government securities, it increases or decreases the level of reserves in the banking system.
This confirms the Fed has very little influence if any. Its real power is to affect psychology and play a game with markets to make them participate in its bidding. It is heavily reliant on market participants.
Now, what is the media’s dark secret?
What is it that they don’t want you to find out?
You must understand who and what influences the content out there. Big media companies and networks have a very specific target audience.
Why? Because of ownership and funding. Journalists working for media outlets like BBC or CNN no longer pursuit real stories, but a narrative that supports the interests of the owners and founders of the media.
In an interview with the industry insider Rick Sánchez, he stated somewhere along the line journalistic entities were owned by people whose business was journalism. Then, the journalistic business turned to the corporate side. The people we should question became owners of media companies.
Sánchez also explained that while he worked for MSNBC, he had to report 9/11 events live and was encouraged to push the war on Iraq when the U.S was attacked by factions inside Afghanistan.
He realized it at the time he was working for General Electrics, which was the company making the most money from the war with Iraq and also the owner of MSNBC.
He went on to say that type of interlocking in the journalism industry between people who sit on the board of media outlets as MSNBC, CNN, or Fox News, who have an interest in telling certain stories and having certain stories not told, causes other influencers on platforms like Youtube to gain more credibility against media giants.
What happens often now is a big share of news entities exist solely to further the agenda of corporation owners and funders. They focus on creating a narrative that supports corporate interests, rather than telling the facts. Reality is created, not reported.
How do you know you are being manipulated?
Who benefits from this story?
Are these facts or just a narrative?
Those two questions will help you navigate through the influx of news and misinformation out there.
That is where biased media outlets take us, misinformation.
A great example of this is Jeff Bezos buying The Washington Post.
Why would someone like him buy a company in decadence?
It’s because he doesn’t care about profit, but influence.
How does the media play in the Fed’s game?
The media pushes a Fed put, that it can support the market or create inflation, you just need to check out Bloomberg or CNBC.
Now, why would the owners of these media outlets want to boost this narrative further?
If there is a Fed put and everyone believes it, when the Fed does quantitative easing, the stock market would go up and benefit the ownership by driving share prices to the roof.
The list of advantages is long once the general public and the marketplace buy the Fed’s story without seeing the underlying data.
My prediction is like the Fed’s impotence is further displayed to the marketplace over the next years, the narrative the media pushes will be worse, more exaggerated. Not only with the Fed, but with the divisiveness we live in today.
It takes us into a media vortex that starts with an incentive, goes to manipulation, and ends up in brainwashing. This applies to calls for the Fed, starting riots, wars, or buying dips.