Fed maintains money flow to Wall Street
The US Federal Reserve has kept its base interest rate at near zero and maintained its asset purchases at the rate of $120 billion a month. That decision, announced yesterday after a two-day meeting of its policy-making committee, was expected.
But in response to concerns by some members of the Fed’s governing body that the present sharp rise in inflation may prove to be permanent rather than a “transitory” effect of economic recovery from the pandemic, the official statement from the meeting hinted that “tapering” of its bond purchases may be closer than previously thought.
Last December, the Fed said its asset purchases would continue until “substantial further progress” had been made toward its goals—full employment and 2 percent inflation.
“Since then,” the statement said, “the economy has made progress towards these goals, and the committee will continue to assess progress in coming meetings.”
This was widely interpreted as a signal that it was at least moving to a closer consideration of a wind-back in asset purchases.
But Fed chair Jerome Powell, who has been characterised as occupying a centre position between the so-called doves and hawks within the governing body, made clear there were no immediate plans to withdraw the unprecedented levels of support the central bank has provided to financial markets and Wall Street.
With US employment levels still some 7 or 8 million below where they were before the pandemic, he said further gains in employment would be needed before any tapering of asset purchases.
“We have some ground to cover on the labour market side,” he said at his press conference following the meeting. He repeated his assertion that inflation was “transitory” while insisting the Fed would use its “tools” to counter any permanent rise.
In his prepared remarks he said conditions in the labour market had continued to improve and demand for labour was “very strong” but “nonetheless, the labour market has a ways to go.”
The focus on the state of the labour market as the reason for the maintenance of flow of money is essentially a cover for the real objective which is to ensure that the monetary props for Wall Street remain in place—a fact that is well known in financial circles.
As Thomas Hayes, chairman of Great Hill Capital, an investment management firm, commented to the Wall Street Journal on Powell’s remarks: “I don’t think he could have been more dovish. There’s nothing that the Fed could do that would be more accommodative to the stock market.”
Despite the Fed’s claim that the US economy is on the road to recovery there are significant contradictory signals. While inflation is rising, along with economic growth, the yields on Treasury bonds have been falling—an indication that financial markets consider growth could stall, if not develop into a recession.
Asked about the divergence between the economic growth outlook and the bond market at his press conference, Powell could offer no explanation apart from saying that it may be due to “technical” factors “where you put things you can’t quite explain.”
The fall in bond yields, a result of increased demand and rise in their price (the two move in opposite directions), has been significant.
At the end of March when there was an expectation of increased growth and inflation, the yield on the 10-year Treasury bond was at a 13-month high of 1.75 percent. By the middle of June it had fallen to 1.57 percent—a significant movement in this market—before dropping further to 1.26 percent on Wednesday. This could well be on the back of financial market expectations that what lies ahead is stagflation––higher prices combined with lower growth.
In an interview on CNN Financial Times columnist and editorial board member Rana Foroohar said in her 30 years in finance journalism she had never seen so many variables—from the effect of the Delta variant, inflation, to lower growth in China—impacting on the global economic outlook.
Apart from the continuing stimulus for Wall Street, another significant decision by the Fed was to establish a new facility to provide liquidity to big Wall Street banks as well as foreign central banks in times of financial turbulence.
Under the facility, the Fed would enter overnight repurchase (repo) agreements in which it would take in Treasury debt and mortgage-backed securities in return for cash at a rate of 0.25 percent. There would be a daily cap on the facility of $500 billion. A similar facility would be extended to foreign central banks with a daily limit of $60 billion. The facility may also be expanded in the future to include deposit-taking banks.
The new facility has been developed in response to the financial market crisis of March 2020 when the $21 trillion US Treasury market—the bedrock of US and global financial system—effectively froze in what was dubbed a “dash for cash” as buyers for Treasury debt disappeared.
The measure has been under discussion for some time as the Fed continues to try to assess what took place in the March crisis. New York Fed chief John Williams said earlier this month that a standing repo facility would not be used much in normal times but if there was an “unanticipated shock” it would keep short-term interest rates from spiking.
Its establishment indicates that another crisis on the scale of March 2020 could take place because none of the underlying problems and contradictions that gave rise to it have been resolved.
The decision of the Fed is in line with recommendations in a report from a group of 30 former central bankers and financial policymakers issued yesterday. The group, which includes former US Treasury secretaries Timothy Geithner and Larry Summers and former Bank of England governor Mervyn King, said reforms were needed to ensure that the most essential bond market was able to function smoothly in times of financial stress.
It said a “standing repo” repo facility was the “single most important near-term measure” that should be adopted.
But it pointed to deeper concerns. “This is a market that has outgrown its infrastructure and its regulatory framework, Oversight is fragmented and diffused. The capacity of existing market makers has not grown with the size of the Treasury market itself,” the group said.
According to Geithner, in remarks reported by the Financial Times, the pressure for reform could be “undermined by the belief that the Fed can always step in and fix things” and this was “not a particularly wise approach.”
The report underscores the findings of a report by the G20 Financial Stability Board last November. It said that while the intervention by the Fed in March 2020, when it pumped out trillions of dollars, may have stabilised the situation, the “financial system remains vulnerable to another liquidity strain, as the underlying structures and mechanisms that gave rise to the turmoil remain in place.”
Millions of people voted for Biden believing his pledge that he would “follow the science” in confronting the pandemic. As the WSWS warned, the Senator from DuPont and the credit card companies has not followed the science, but the interests of Wall Street.
Leaked CDC document exposes Biden administration’s COVID-19 cover-up
On Thursday, the Washington Post published a leaked internal memorandum from researchers at the Centers for Disease Control and Prevention (CDC) warning of mass community spread of COVID-19 among vaccinated people and calling on the Biden administration to stop discouraging mask wearing and social distancing.
The secret report contradicts nearly every public statement by the White House over the course of the past two months. Bringing together a broad range of public research—including some that was previously unpublished—the report warns that there are 35,000 symptomatic COVID-19 infections every week among vaccinated people.
The report states that vaccinated people who are infected with COVID-19 are just as infectious as those who are unvaccinated. It acknowledges that the so-called Delta variant of COVID-19 is more infectious than the common cold and, in fact, one of the most transmissible diseases known to man.
The document refutes President Joe Biden’s claim on July 22 that vaccinated people do not spread COVID-19—“You’re not going to get COVID if you have these vaccinations.”
For months, Biden has used the claim that vaccinated people are fully protected from COVID-19 to justify the abandonment of masking and social distancing requirements, despite the fact that the CDC had access to data definitively proving the opposite. “Take your mask off, you’ve earned the right,” Biden said in June.
On May 13, the CDC reversed its guidance on mask-wearing, urging vaccinated people to stop wearing masks and socially distancing in crowded areas.
“Anyone who is fully vaccinated can participate in indoor and outdoor activities, large or small, without wearing a mask or physical distancing,” CDC Director Rochelle Walensky declared in May.
The CDC’s statements prompted the near-total abandonment of mask-wearing in the United States. Within days, businesses stopped enforcing mask mandates, while the vaccinated public, misinformed by the CDC, went maskless in public and reduced social distancing.
The deliberate promotion of false advice by US health authorities helped drive a massive resurgence of the pandemic, with cases now surging 50 percent per week.
In the leaked report, CDC scientists call for an urgent reversal of this catastrophic guidance, declaring in bold, “universal masking is essential to reduce transmission of the Delta variant.”
The document further calls for “community mitigation strategies” and non-pharmaceutical interventions, which are “needed to reduce transmission of Delta variant”—such as the closure of non-essential businesses and schools.
In response to the leaked memo, the Biden administration made clear that it has ruled out serious measures to contain the disease. “We are not going to head towards a lockdown,” White House spokesperson Karine Jean-Pierre said Friday.
It is unclear how the internal CDC document was leaked to the Washington Post. It remains the case, however, that it was not released by the CDC or Biden administration, and the CDC declined to comment on its publication to the Post—indicating that its leadership opposed its release to the public.
The media’s framing of the report was largely misleading. The report was presented by NBC Nightly News as “new findings from the CDC,” without mentioning that the document was leaked without the CDC or White House’s permission. Its findings were presented as unforeseen and surprising, completely ignoring the fact that most of the report’s conclusions were well-known beforehand.
Epidemiologist Eric Feigl-Ding, who has for months been raising the alarm about the Delta variant of COVID-19, including in an interview with the World Socialist Web Site in May, responded to the CDC report by detailing, point by point, how the main findings had been known for months.
Noting a study from Public Health England and Public Health Scotland that found the Delta variant was nearly three times as dangerous as the Alpha variant, Feigl-Ding asked, “What’s the date of the report? June 3rd 2021!!! That’s ~2 months ago!”
“We have long known vaccinated transmit,” Feigl-Ding wrote, pointing to a tweet from nearly a month ago in which he showed research from Singapore demonstrating community spread among vaccinated people. He wrote at the time, “This demonstrates why vaccinated people still need to mask up damnit!”
He continued, “Oh cmon, when should CDC have known? The data from Singapore Ministry of Health was all freely accessible online and updated **daily**… and you can see the above graph’s vaccine breakthrough #DeltaVariant cluster was already apparent by mid June!!”
Feigl-Ding continued, “why didn’t we know about breakthrough infections causing transmission earlier? Was the CDC lying or neglectful & derelict in their duty to monitor? Let’s rewind to May 2021— @CDCgov decided to stop collecting & investigating mild breakthroughs!”
Feigl-Ding also noted that on June 26, epidemiologist Larry Brilliant had explained that “the Delta variant is more transmissible than smallpox.”
In the article breaking the story, the Washington Post quoted an unnamed CDC official calling for the full publication of the data in the report, “Waiting even days to publish the data could result in needless suffering and as public health professionals we cannot accept that.”
In May 2020, the ousted US health official Rick Bright filed a whistleblower complaint making clear that “public health officials were fully aware of the emerging threat of COVID-19 by early January 2020,” despite the Trump administration’s efforts to downplay the dangers posed by the pandemic.
Future whistleblowers will show the CDC knew almost everything in the newly released report months ago, based on the publicly available data cited by Feigl-Ding and the World Socialist Web Site.
More than two months ago, on May 23, the WSWS published a perspective titled, “Abandonment of health measures threatens US COVID-19 resurgence.”
We wrote at the time:
The reduction of COVID-19 cases in the United States is the outcome of mass vaccination that came about as a result of an unprecedented effort by scientists and academic institutions to create a whole new class of vaccines in record time.
In a rational society, the reduction of COVID-19 cases would be used to strengthen protections ahead of what public health experts warn will be a new resurgence in the fall. But the Biden administration is squandering what health officials call a temporary reprieve to abandon measures to monitor and contain the disease.
We warned that the continued abandonment of public health measures will mean “the disease that has already killed nearly a million people in US will take the lives of countless others.”
The Biden administration had access to the fundamental conclusions of the CDC’s report when it called for the end of masking and social distancing in May, just like the World Socialist Web Site did when we warned these actions would lead to a surge of the pandemic. Biden administration officials knowingly and with criminal malice encouraged measures that they knew would lead to a resurgence of the pandemic, which now threatens to kill hundreds of thousands more people.
Millions of people voted for Biden believing his pledge that he would “follow the science” in confronting the pandemic. As the WSWS warned, the Senator from DuPont and the credit card companies has not followed the science, but the interests of Wall Street.
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