Janet Yellen concluded another FED meeting on Tuesday, in which she testified in front of Congress. Members of the Democratic party attempted to get her to come out and denounce President Trump’s policies, but she instead kept to her expected “neutral” position and said nothing of the sort.
Minor critiques and cautions were given to the new administration on treading lightly into any major tax reforms or cuts in government spending, but this is nothing unusual, and par for the course, no matter which party is in office.
Janet Yellen went on in her typical fashion that the FED has so strongly adopted in the past of double speak. She made the markets spin around in a constant state of confusion, saying nothing substantial or overly concrete.
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Yet, there was one thing that she did say and of which is a major change of course for the FED. Janet Yellen, as I predicted last year that she would, is now advocating for a strong dollar. Yes, you heard that correctly. She has continued on with her hawkish speak and is now intentionally trying to prop up the dollar.
This goes against everything that the FED has done in the past, and it should make you pause and wonder why the FED has suddenly stopped trying to destroy the dollar and “found religion”.
A segment of the financial community – those of us that would consider ourselves skeptical of the FED’s true motives – believe that this is a very intentional change of course and is in fact an attempt to plunge the United States into another recession.
However, I believe that this is long overdue and a strong dollar is in fact good for the population of the United States, despite what many in the financial community would have you believe.
Yet, their motives and mine are very different in my opinion. I personally believe that these are the prudent steps that need to be taken for a sustainable long lasting economy. However, the FED likely has very different motives for attempting to “crash” the economy.
This hawkish talk obviously caused the dollar to gain in strength, but unfortunately for Janet Yellen, President Trump quickly changed that course.
Likely knowing exactly what the FED was doing, he once again took actions into his own hands and stated that major spending was on route for infrastructure, as well as significant tax cuts.
This of course caused the dollar to falter in strength and reverse the upward momentum that it was experiencing based on the FED’s comments.
It looks now as if we are going to have two opposing factions: the FED who attempts to raise rates and jawbone the dollar into a rally, and President Trump who attempts to keep the dollar weak and thus put off the inevitable collapse that is in store for the United States and much of the West.
Strong dollar, weak dollar, strong dollar, weak… the cycle of MOPE continues on.
Article by Nathan McDonald, Sprott Money