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You want to see how bad Powell is?

The left side in the graph above is the level of the Taylor rule, right side is the level of Fed Funds, takes a minute to toggle. Look at where we were when Trump came in, nearly seven years of 25bps. Then Powell raises Fed Funds up to 2.5%. from .50, Taylor rule was only up 139bps in that period. Fed is supposed to use discretion and during that time period CPI MoM changes were in a tighter range than they had been over the prior 7 years when rates were at .25.

Powell is completely compromised.

Background (perplexity) : Jerome Powell came under public scrutiny for a stock trade that took place on October 1, 2020, when he sold between $1 million and $5 million worth of shares from an index mutual fund just before a significant stock market drop later that month. The timing of this sale—days ahead of a major market decline and around the period of key Federal Reserve decisions—raised concerns about potential conflicts of interest and the appearance of insider trading, even though the trade involved a broad index fund rather than individual stocks.

The controversy was part of a broader scandal involving several Federal Reserve officials making large trades during periods of intense Fed activity and market volatility in 2020. This led to widespread criticism, calls for investigations, and ultimately, the Federal Reserve instituting stricter rules banning senior officials from trading individual stocks and requiring more rapid disclosure of trades.

However, a subsequent investigation by the Federal Reserve’s inspector general cleared Powell of wrongdoing, finding that the trades were executed by a financial adviser for his family trust and that neither Powell nor his wife had contemporaneous knowledge of the timing, which coincided with a Fed blackout period. The inspector general concluded there was no evidence of laws or policies being violated by Powell.”

Mark Bialek was appointed as Inspector General of the Federal Reserve Board and the Consumer Financial Protection Bureau by the Chairman of the Federal Reserve, not by the President or the Senate. This is in accordance with the Inspector General Act as applied to the Federal Reserve, which gives the Fed Chair the authority to make this appointment. He was the one who “cleared” Powell

Guess who is currently the Inspector General of the FED?

My opinion on Powell is that he has had two very important tasks.

1.) to slow Trump down on all the de-regulation he was doing in his first term and

2.) to slow down the migration of tax payers and wealthier people from the Blue States to the Red States? How did he do this ? He let Bonds crash during ’21/’22 so people would be locked into their mortgages.

If the Fed were to cut rates, we would see Long Bonds rally massively. Why?

1.) real yields on 10 years are around 2.%, in Jan it was 2.3%. If Bills become less attractive because Fed is cutting it would make people take risk in the longer end.

Also, the Fed led by Bowman is talking about removing the eSLR which is a reserve requirement to own Treasuries in the G-SIB Banks. Possibly the FED could also do another BTFP which would allow Treasuries to be borrowed against at par ignoring losses kind of like an off balance sheet put. 

If Bonds rally homes start selling and mortgage rates go lower.

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