Joe Biden and Jerome Powell Drop An Inflationary Neutron Bomb on Trump’s America

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Hi. I’m Peter Navarro. It’s March 20, 2023; and in this episode of my Taking Back Trump’s America podcast, I’m going to describe the inflationary neutron bomb that Joe Biden and Fed Chair Jerome Powell just dropped on the US economy and describe how the latest Fed policy using the so-called “discount window” is equivalent to expansionary monetary policy on steroids at a time when the Fed and the White House and Congress should be far more focused on controlling inflation rather than igniting it.

But first, two quick comments on some unrelated stories. First, there were news reports over the weekend that the Biden Regime is going to soften its policies on Communist China in the hopes that China won’t start arming Russia for its Ukrainian invasion. This is exactly the wrong thing to do, and yet another case of how Communist China will exploit world crises to back the United States off from our real enemy, which is Communist China itself.

Note to Joe Biden and Anthony Blinken: The way you are managing your Ukraine policy is not only driving the world up the nuclear holocaust ladder. It is weakening our position towards Communist China. I can’t wait until Donald Trump takes you both out with the trash.

Second, I’m a fan of Jack Posobiec but I found his exclusive Sunday softball interview with former Project Veritas head and King of Whistle Blowers James O’Keefe extremely disappointing. O’Keefe needs to use said whistle on the Board of Directors at Project Veritas who fired him, in what appears to be an unconscionable reaction by the Board to an absolutely amazing takedown by O’Keefe  of Pfizer and its scurrilous vaccine policies.

Instead of getting to the bottom of that with James, Brother Jack did an extended commercial for O’Keefe’s  new investigative vehicle. Memo to James, who I respect immensely: You owe us an explanation, particularly given your reputation as America’s premier whistleblower. James: blow the damn whistle. What exactly happened?

Now let’s get down to the business at hand: the unprecedented assault of a sitting president and Fed chair – Treasury Secretary Janet Yellen is a co-conspirator – on the US economy and, by extension, the US dollar. If you been following this podcast and the news, you know that in the wake of the collapse of Silicon Valley Casino, that is, Bank, the White House and Federal Reserve have collaborated in an unprecedented bailout of the entire banking system. The result is moral hazard on steroids and what is likely to be a severe inflationary jolt to our economy. Here’s the deal:

Fed Chair Powell is keeping Joe Biden’s bailout promise in two ways: one by opening the Fed’s discount window and two through something called the Bank Term Funding Program. Distressed banks can take out 90 day loans from the Fed through the discount window and up to a year through the new program. And here is the kicker:

In the past, the Fed’s discount window has fulfilled the Fed’s function as “lender of last resort,” but in the past if a bank needed to borrow money, it had to provide collateral, typically in the form of government bonds. But, to ensure that it would get paid back, the Fed would discount how much it would actually give back in the same way that a pawnshop will take  a valuable item from you and give you cash but not enough cash to cover the full value of the item in case you don’t come back for it.

In this case, however, the Fed is providing not just the full value of the bonds but the face value of the bonds. Remember here that the banking system is in crisis because in a period of rising interest rates and therefore falling bond prices, their bond holdings have lost value. Therefore they have what’s called “unrealized losses.”   If they can hold the bonds to maturity, they do not have to accept the loss; but with depositors leaving their banks in droves, many had been forced to liquidate and that is the cause the ensuing credit crunch and crisis.

So, what the Fed is offering again is not just the value of the bond at this point in time with its unrealized losses but rather the full face value of the bond; and any bank in this country no matter how minor or severe the crisis would be a fool not to go to the discount window and get rid of any bonds they need to. That’s right, that’s exactly what is happening. They are not going there for loans. They’re going there simply to dump the bonds off, default on the bonds, and leave the Fed holding that bag on its balance sheet.

Just last week, America’s banks collectively sucked $164.8 billion out of the Fed’s discount window, which blew past the record of $111 billion established in the heat of the 2007-2008 crash. Yes, this is how serious this one is.

Banks get a similar deal from the Fed’s one year window, the so-called Bank Term Funding Program, that is, full face value the bonds; and America’s banks pulled another $12 billion out of that program last week, and the only reason why that is such a smaller amount is that the program is much harder to use. So why not just go to the discount window and dump your bonds there?

Now here’s the punchline: By putting the bonds of all the distressed banks on its own balance sheet, the Fed is effectively expanding monetary reserves in the system; and it is through such an expansion of reserves that the Fed creates new money. So think about that: Even as the Federal Reserve is trying to fight inflation by raising interest rates and tightening credit, it is now operating a program that will work in the exact opposite direction by expanding the money supply and loosening credit.

You can’t make this up; and what Biden and Powell are doing is truly the equivalent of an inflationary neutron bomb that will be exploding in the US economy over the next 12 to 24 months and perhaps longer. I remind you here that this is coming on the heels of the latest Consumer Price Index report which had prices higher than expectations and clearly was signaling that inflation was anything but under control.

The broader implication of this policy will be to weaken the US economy by exacerbating the inflationary crisis and hammering the US dollar as inflation drives down its value. Of course it will be black, brown, and blue-collar Americans and middle-class families across Trump’s America that will pay for all of this. Look for your 401(k)s to turn into 201(k)s and don’t expect to retire as quickly as you thought you might be planning to. This is not just bad. It keeps getting worse and it is a politician- made disaster made by Joe Biden and Jerome Powell. Peter Navarro. Out.