"THE CLAMAN COUNTDOWN."
"KUDLOW" IS NEXT.
♪.
LARRY: HELLO, EVERYONE, WELCOME
TO "KUDLOW."
I’M LARRY KUDLOW.
I WANT TO BEGIN THIS EVENING
WITH SOME THOUGHTS ON TODAY’S
SENATE HEARING WITH TREASURY
SECRETARY JANET YELLEN AND FED
CHAIR JAY POWELL AND THE HEARING
HAD THE PERFECTLY AWFUL TITLE,
CARES ACT OVERSIGHT OF THE
TREASURY AND FEDERAL RESERVE,
COLON, SUPPORTING AN EQUITABLE
PANDEMIC RECOVERY.
END QUOTE.
OUR FIRST GUEST BY THE WAY,
SENATOR PAT TOOMEY AND HE
ATTENDED THE HEARING.
HE WILL GIVE US HIS CURBSIDE
REPORT.
I WANT TO NOTE DURING THIS
PANDEMIC EMERGENCY PERIOD GOING
ALL THE WAY BACK TO
FEBRUARY 2020 LAST YEAR, I WANT
TO TALK ABOUT THE FEDERAL
RESERVE.
THE FEDERAL RESERVE HAS TRULY
DONE ITS PART TO INJECT CASH
INTO THE ECONOMY.
BY OUR CALCULATIONS OVER THE
PAST 18 MONTHS THE FED HAS
ACTUALLY BASICALLY DOUBLED ITS
BALANCE SHEET FROM $4.1 TRILLION
TO $8.3 TRILLION.
SO ESSENTIALLY THEY INJECTED
OVER FOUR TRILLION DOLLARS OF
NEW CASH INTO THE ECONOMY.
ANOTHER WAY OF LOOKING AT IT
THROUGH THE M2 MONEY SUPPLY
WHICH HAS JUMPED FROM
15.5 TRILLION TO 20.5 TRILLION.
THAT IS A GAIN OF FIVE TRILLION
DOLLARS OR 32%.
NOW THESE ARE NUMBERS THAW FOLKS
OUT THERE PROBABLY DON’T CARE
ABOUT, RIGHT?
I GET IT.
WE’RE GETTING INTO THE WEEDS
HERE BUT I LIKE THE WEEDS.
I STARTED MY CAREER IN THE WEEDS
SOME 48 YEARS AGO IN OPEN MARKET
OPERATIONS AT THE NEW YORK FED,
YES INDEED.
THE ONLY REASON I’M PUTTING
THESE NUMBERS ON THE TABLE
TONIGHT IS TO SHOW YOU JUST HOW
BIG THEY ARE.
IN OTHER WORDS WHILE EMERGENCY
PANDEMIC RELIEF FISCAL POLICY
SPENT ABOUT FOUR TRILLION
DOLLARS LAST YEAR, ANOTHER TWO
TRILLION DOLLARS, THIS PAST
WINTER, AND POSSIBLY HEADED FOR
SIX TRILLION IN THE NEXT MONTH
OR TWO, SAVE AMERICA, KILL THAT
BILL, THE FED IS DOING ITS PART
BY PUMPING IN FOUR TRILLION
DOLLARS OF HIGH-POWERED CASH
LEADING TO A FIVE-TRILLION
DOLLAR JUMP IN THE NATION’S
MONEY SUPPLY.
ALL THAT FED NEW MONEY WAS
BASICALLY SITTING IDLE FOR MUCH
OF LAST YEAR.
IN THE HEART OF THE PANDEMIC THE
GOVERNMENT SHUT DOWN, THE
ECONOMY WAS SHUT DOWN.
MOST FOLKS WERE PLAYING DEFENSE.
THEY WERE HOARDING THEIR CASH,
THEY WERE AVOIDING RISK, SO THE
MONEY SUPPLY REALLY WASN’T
INFLATIONARY BUT AS THE ECONOMY
HAS REOPENED THROUGH THE VACCINE
MIRACLE OF OPERATION WARP SPEED
THE FED CONTINUED PUMP PRIMING
RIGHT NOW, BEGINS TO THREATEN A
LONGER-TERM INFLATION PROBLEM.
NOW EXCESS MONEY IS DIFFERENT
FROM PANDEMIC SHORTAGES IN THE
ECONOMY ALTHOUGH IT TAKES LONGER
FOR MARKETS TOES TO HEAL THOSE
SUPPLY CHAIN PROBLEMS.
CONTINUED FED CASH INJECTIONS IS
COMPLETELY DIFFERENT.
IT IS A VERY WORRISOME MATTER.
THERE IS A CONNECTION BETWEEN
MASSIVE FEDERAL OVERSPENDING,
FEDERAL GOVERNMENT OVERSPENDING
AND MASSIVE FEDERAL RESERVE
OVERPUMPING.
THINK OF IT THIS WAY.
WHILE THE BUDGET DEFICITS PILE
UP THE FED SEEMS TO BE FINANCING
GOVERNMENT SPENDING AND
BORROWING.
FOR EXAMPLE, OVER THE PAST
1MONTHS THE CENTRAL BANK HAS
PURCHASED GET THIS, 57% OF THE
NEW MARKETABLE TREASURY DEBT
THAT WAS ISSUED, 57%.
THAT IS NOT SUPPOSED TO HAPPEN,
FOLKS.
YOU CAN GO ALL THE WAY BACK TO
THE 1951 FED TREASURY ACCORD
WHERE THE FED STOPPED PEGGING
LONG-TERM INTEREST RATES AND
STOPPED BUYING WAR-TIME BONDS.
IN FACT YOU COULD GO ALL THE WAY
BACK TO THE 1913 ORIGINAL
FEDERAL RESERVE ACT WHERE THE
CENTRAL BANK’S MAIN PURPOSE THEN
WAS TO PROVIDE AN
INSTITUTIONALIZED CURRENCY
ELASTICITY BUT NOT TO FINANCE
GOVERNMENT SPENDING AND
BORROWING.
I REMEMBER IT WELL.
I WAS THERE.
THAT IS A JOKE.
IN LATIN AMERICA BY THE BY AND
SOME OTHER PLACES CENTRAL BANKS
BUY ALL THE GOVERNMENT DEBT,
PRINT ALL THE MONEY, AND INFLATE
THE ECONOMY AND DESTROY THE
CURRENCY.
NOW FORTUNATELY WE’RE NOT THERE
YET.
IN FACT KING DOLLAR IS STRONG
AND RELIABLE.
THAT’S GOOD, VERY GOOD.
GOLD HASN’T MOVED IN QUITE SOME
TIME, HOWEVER, COMMODITY PRICES
ARE ON THE RISE SUGGESTING
POWELL AND COMPANY ARE STILL TOO
LOOSE AND EVEN THE CPI BREAK
EVENS IN THE INFLATION ADJUSTED
TREASURY BOND MARKET ARE SHOWING
GRADUALLY HIGHER INFLATION
EXPECTATIONS.
BY THE WAY THE 10-YEAR BOND IS
NOW UP TO ABOUT A BUCK 55.
SO I MUST SAY I’M GETTING
WORRIED ABOUT INFLATION.
FRANKLY THE FED SHOULD HAVE
STOPPED BUYING MORTGAGE BONDS
SIX MONTHS AGO.
MAYBE THEY’RE GOING TO TAPER
DOWN THEIR PORTFOLIO PURCHASES
IN A COUPLE OF MONTHS BUT WHO
KNOWS AND I WILL SAY THE RISE IN
LONG-TERM BOND RATES IN RECENT
WEEKS COULD BE SIGNALING THE FED
IT IS TIME TO RAISE THEIR TARGET
RATE, THE FED FUNDS RATE BEFORE
SERIOUS INFLATION BREAKING OUT.
MEANWHILE THE FED, AND I PRESUME
THE WHITE HOUSE WERE RIGHT TO
DUMP THE DALLAS AND BOSTON FED
PRESIDENTS FOR TRADING STOCKS
AND BONDS.
THAT’S A BIG NO-NO.
BY THE WAY WE COULDN’T DO
ANYTHING LIKE THAT IN THE
EXECUTIVE BRANCH BUT I AM REALLY
CONCERNED THAT MORE AND MORE
FEDERAL SPENDING AND MORE AND
MORE FEDERAL BORROWING PUTS MORE
AND MORE PRESSURE ON OUR CENTRAL
BANK TO FINANCE THE DEMOCRAT’S
BIG GOVERNMENT SOCIALISM CRADLE
TO GRAVE WELFARE DEPENDENCY
ASSAULT ON WORK AND WAGES AND
JOBS AND PROSPERITY.
REMEMBER THE FED HAS AN
IMPORTANT TRADITION OF
INDEPENDENCE BUT IF THEY CATER
TO THE DEMS’ FAR LEFT
PROGRESSIVE WISH-LIST AND IF
THEY FINANCE IT, THEY WILL LOSE
THEIR INDEPENDENCE.
WE WILL LOSE THE INFLATION RACE
AND WE WILL LOSE KING DOLLAR IN
THE PROCESS AND THAT WOULD BE