Central Banking Is A Joke, And You Are The Punchline

British Prime Minister Boris Johnson gets paid less than Canadian Prime Minister Justin Trudeau. Each of them is getting less salary than US President Joe Biden’s US$400,000. Why do we want you to know this? 

Because each is paid well enough already. And each of them holds a job that contains implied fiduciary duties to place themselves on equal footing with everyone else. 

They cannot look after their own financial health more than they look after the financial health of everyone else.

If any of these three leaders broke their social contract with the country by taking something which did not belong to them, say scooping out some government tax money to feather their retirement nest egg. This makes everyone upset and each of these gentlemen would lose their next election.

The whole point of these salaries plus attendant retirement packages is to dull the temptation for politicians to get sticky fingers when the siren of shady opportunity whispers their name.

Central Banks Keep Making the Rich Richer

Now let’s talk about central bankers. First, central bankers are not voted but appointed. Nonetheless, they are public servants with little oversight.

Central bankers are well compensated. How much are they paid? Chair Powell draws an annual salary of US$203,500, with the remainder of the Fed Board pulling in US$183,100, and the presidents of the Fed Banks make twice that with salaries ranging between US$340,000 and US$466,000.

Isn’t this enough money that everyone should expect these officials to not start moonlighting as active traders for the benefit of no one except themselves? Damn, right it is.

And shouldn’t these other public officials hold central bankers to an ethical standard? After all, they are the ones making decisions that affect governments, companies, and individuals worldwide. Yes – they should be!

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Then why is it just now coming to light that Central Bankers have been trading in equities, corporate bond markets, and muni bond markets that directly benefit from their monetary policy decisions.

And it seems like very convenient timing that they are coming out and saying that they are going to sell their stocks now because of a ‘possible conflict of interest’. Timing it mere weeks before the Fed is expected to make its official plan for tapering asset purchases!

What we can see is that interest rates and money printing drive the stock markets higher; central bank employees know more than anyone about when the interest rate and money printing might stop sending stock markets higher. Dallas Fed President Kaplan has scooped up money by riding the stock market train higher. 

And now has front ran the Fed’s official tapering announcement by selling these stocks. It wasn’t only Kaplan in stocks, there was Boston Fed President Rosengren that held real estate investment trusts that owned mortgage-backed securities. While the Fed purchased mortgage-backed securities and Richmond Fed President Barkin held corporate bonds.

Meanwhile, the Fed created a corporate bond facility that purchased upwards of US$46 billion in corporate bonds.

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And even Chair Powell’s trust held municipal bonds while the Fed purchased municipal bonds. Is it only coincidence that the Fed purchased some of the same type Munis held in Powell’s trust? 

The worries you and I have about when the FED or ECB might stop printing money to force markets higher are not worries that central bank employees have because they are inside the conversation.

Central banking is supposed to support the overall economy. However, it has turned into a joke because it benefits people who are already rich way more than it benefits anyone else.

Politicians [who are already rich] benefit from central banking because they make promises to the public without worrying about how to fund those promises.

Hedge Fund managers [who are already rich] benefit because low interest rates allow them to make ever bigger bets with borrowed money.

Its people who work with their hands and use money from their labour to buy food and housing that never benefit. This is because money printing leads to higher prices which rise faster than wages do. Eventually, it leaves the hourly wage workers behind.

But wait, this is more inequity to this story!  Should we take it as a sign that the Fed is now reviewing its employee manual to (maybe) tackle the image problem that comes from employee self-dealing.  

Central Banking- Transparency is MUST for Financial Stability

Is this the sign of the Fed changing policy? Interest rates are going to raise as tapering is about to commence!  

Since we have already shown that central bank employees make great trades. We cannot ignore the information value which comes from knowing that after the last couple of years of being happy and successfully long the lower rates trade that the Fed Presidents are now selling.

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After all, Dallas Fed President Kaplan has been one of the most outspoken voices over the last year. He spoke about how the monetary stimulus is boosting risk levels in the financial sector and “hawkish” that the Fed should raise rates sooner rather than later, all the while making multiple million-dollar trades in companies, such as Tesla, Amazon, Google, etc. that benefit from lower interest rates and money printing.

 Central banks spend millions each year to host press conferences and tailor messages for the rest of us.

Central bank officials should be held to a higher standard of no insider trading. As regulators do for the private sector which the Fed is among those regulators.

Otherwise, could it be that the best message is simply to be transparent about what the employees are doing with their own money and ignore the tailored message they deliver to the rest of us!

From the Trading Desk



Stock Update:

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Silver Britannia’s for UK delivery or storage are still available at the lowest premium in the market also (which includes VAT at 20%).

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Market Update:

We had the Fed meeting on Wednesday with the Federal Reserve officials signaling they would ‘probably’ begin their bond-buying program ‘soon’.

If the progress towards the Fed’s employment and inflation goals ‘continues broadly as expected, the committee judges that a moderation in the pace of asset purchases may be soon be warranted’.

Meanwhile, global investors are also closely watching what happens (Thursday) with Evergrande.

What will be the due date of the overseas USD bond coupon payment, and will they default on it. 

The question with Evergrande is not if it can be contained but does Xi wants to rescue one of the largest property developers and associated interests.

It kind of goes against everything he is doing – taking on big Tech, Macau, online education, HK property developers all in the name of ‘common prosperity.

Verbal reassurances from Chinese policymakers are likely in the coming days which may help the contagion fears, with fresh liquidity injections to prevent systemic risks. 


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GOLD PRICES (USD, GBP & EUR – AM/ PM LBMA Fix)

22-09-2021 1775.35 1773.40 1302.40 1300.79 1513.31 1512.00
21-09-2021 1766.45 1774.45 1290.57 1299.25 1505.37 1513.25
20-09-2021 1757.15 1757.75 1284.83 1285.62 1501.48 1500.24
17-09-2021 1766.10 1755.95 1280.25 1275.00 1499.24 1493.79
16-09-2021 1781.45 1747.95 1289.41 1269.19 1513.52 1486.81
15-09-2021 1801.40 1796.95 1302.95 1297.40 1523.62 1520.40
14-09-2021 1788.65 1792.75 1289.26 1292.39 1513.56 1516.67
13-09-2021 1787.85 1793.90 1293.87 1296.09 1516.63 1520.33
10-09-2021 1799.90 1794.60 1297.55 1293.91 1519.30 1516.44
09-09-2021 1795.35 1788.25 1299.12 1292.01 1517.61 1513.57

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Stephen Flood

Stephen Flood is the CEO of GoldCore. He is a former Wall Street equity trader and FinTech expert. He has been involved in the precious metals markets since 2004 and has appeared as an expert contributor on CNBC, CNN, BBC, RTE & Bloomberg TV and has had articles published in the Irish Times, Irish Independent and The Sunday Business Post.

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