Warming Up the Printing Presses

Posted on May 23, 2025 by MN Gordon

The Federal Reserve is up to its old money printing games once again…

Earlier this month it quietly purchased a cool $43.6 billion in U.S. Treasuries. This included $8.8 billion in 30-year Treasury bonds on May 8. Several days before that, it bought $20.4 billion in 3-year Treasury notes and $14.8 billion in 10-year Treasury notes.

What’s going on? Isn’t the Fed supposed to be tightening – not easing – its balance sheet?

If you recall, after creating roughly $5 trillion in credit out of thin air to paper over the coronavirus fiasco, the Fed’s balance sheet peaked at over $8.9 trillion in April 2022. Since then, through quantitative tightening, the Fed slowly reduced its balance sheet to $6.709 trillion on April 28. But so far in May, the Fed’s balance sheet has ever so slightly increased to over $6.713 trillion.

According to the May 7 Federal Open Market Committee statement, “The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage?backed securities.”

However, if the Fed’s balance sheet is increasing – not decreasing – isn’t the Fed acting in conflict with its policy statement? Continue reading →

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From Strategic Retreat to Full Retreat

Posted on May 16, 2025 by MN Gordon

The Great Trade Tariff Saga of 2025 continues…

On Monday, in a joint statement from Geneva, it was announced that the United States and?China had agreed to a 90-day pause on the?tariffs they had put in place over the last month. In the interim, they are, “Moving forward in the spirit of mutual opening, continued communication, cooperation, and mutual respect.”

What exactly this means, no one knows. But it sounded good. And it gave investors a ‘warm and fuzzy,’ which is exactly what they needed.

For practical purposes, U.S. tariffs on Chinese imports will be cut to 30 percent from 145 percent, and China’s tariffs on U.S. imports will be cut to 10 percent from 125 percent.

Wall Street celebrated the news with concerted buying. On Monday, the S&P 500 closed the day with a 3.26 percent gain and the NASDAQ finished with a 4.35 percent gain.

How pleasant. The Liberation Day dip has been vanquished. The S&P 500 and the NASDAQ are both back to where they started the year. Continue reading →

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Suffering the Fed’s Mistakes

Posted on May 9, 2025 by MN Gordon

This week, Federal Reserve Chair Jerome Powell and the Federal Open Market Committee (FOMC) held the federal funds rate within the target range of 4.25 percent and 4.50 percent. Balancing the risks of higher inflation and higher unemployment, and the uncertainty of “which way this will shake out,” was Powell’s stated rationale for the decision.

This made President Donald Trump grumpy. He wants Powell to cut interest rates. He wants lower borrowing costs to help cushion the fallout from his trade tariff policies. In advance of the FOMC meeting, Trump even called Powell mean names on Truth Social:

“There can be a SLOWING of the economy unless Mr. Too Late [Powell], a major loser, lowers interest rates, NOW.”

Lower interest rates would help Treasury Secretary Scott Bessent cover the $1.07 trillion in government debt that must be borrowed between April and September. Lower interest rates would also promote a weaker dollar, which would make American made goods more competitive in export markets. This would be consistent with Trump’s objective to bolster American manufacturing. Continue reading →

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Triggering the Dollar’s Fateful Demise

Posted on May 2, 2025 by MN Gordon

Terror. Confusion. Regret.

These must have been the thoughts and emotions that raced through Gary Hoy’s head as he rapidly fell towards the street below.

Moments before, the 38-year-old lawyer at the Toronto law firm, Holden Day Wilson, had been standing in his 24th floor office. Hoy, who also had a degree in engineering, specialized in building safety and compliance. His academic training had instilled an unwavering faith in the unbreakable nature of his office’s floor-to-ceiling glass.

To demonstrate the strength of these windows, and the robust safety codes they were designed to, he frequently threw himself against them. This stunt was always greeted with gasps and cheers.

On July 9, 1993, Hoy was giving a tour of his office to a group of students. After detailing the rigorous design and safety standards of the windows, it was now time to teach his students a valuable lesson. Like many times before, he took a running start and hurled himself against the glass. But then the impossible happened… Continue reading →

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