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You may have heard the news that U.S. Federal Reserve Vice Chair Stanley Fischer has resigned, and you're wondering so what? What does it mean to me and my investments?
Well, I'm no mainstream media pundit, but I have been tracking and writing about the Fed and its influence on the market for a very long time.
So let me give you my perspective on what this resignation does or doesn't mean.
I'm a data guy, not a political expert. I view the world through the prism of what the data tells us about action and reaction, cause and effect, as it applies to monetary and fiscal policy and stock and bond market behavior. However, people make the decisions about those all-important actions, so to that extent, maybe personalities matter.
Here's what Fischer's resignation means for your money…
Personalities Don't Matter
My view is that central bankerism is a personality disorder, and if you've seen one central banker, you've seen them all.
People who are attracted to the field tend to be genius megalomaniacs, who, when you put 12 of them in a room, become completely delusional about their impact on the real economy.
Likewise, they don't fully grasp the unintended long-term consequences of their actions on the financial markets.
But the impact is direct and profound.
Most of the time, they don't know what's going on in the real economy. The Fed's history of dot plots and economic forecasts is clear: They're always wrong.
They don't know or understand the current conditions, let alone what the future holds. Heck, almost all of them are academics. They've never even held a job in business.
Instead, they devote their whole lives to becoming economic policymakers. The most determined of them reach the highest level of policymaking, the Fed. They get to make policy in an echo chamber where 12 academics, scholars, sit around a huge walnut table in an ornate, marble-tiled conference room and tell each other what they want to hear.
One of them is so politically shrewd that he or she manages to rise to the top of the heap and become the Fed chair. Today it is the esteemed economist Janet Yellen. All her life she's been either an academic or a central banker. The same was true of her predecessor, Ben Bernanke.
And the same is mostly true of Fed Vice Chair Stanley Fischer.
Fischer is notable also for having been Bernanke's professor and mentor at MIT. He was also ECB Chairman Draghi's professor at MIT. He is the former governor of the Bank of Israel. He was an official at the World Bank. For three years – from 2002 to 2005 – he even held a position in the business world, as vice chair of Citigroup in a role that actually had wide-ranging responsibility.
So no doubt, Fischer is a man of enormous intellect, experience, and political skill. He is an influential figure in that padded cell in the Eccles Building where the Fed Board and FOMC get together to reinforce each other's delusions and make policy.
But he's not the boss of bosses. He's merely the consigliere. Let us not lose sight of the fact that the Fed chairperson decides the policy. It has always been so and always will be. The other members of the Fed Board or FOMC always form a consensus around the views of the boss.
And Janet Yellen is very much still the boss.
All the Fedheads give speeches and interviews. The media pays an inordinate amount of attention to them. While you should look at the headlines and be aware of the general consensus of where Fed policy is headed, please don't waste too much of your valuable time on them.
Yellen Is Still In Charge
Here's the thing: Fischer's leaving will have absolutely no impact whatsoever.
Personally, I think Stan, at 73, is getting out while the getting is good. He's bailing before the proverbial sheet hits the fan, which will happen when the Fed starts tightening money for real (if not next month, then a few months hence).
He's also getting out just as the U.S. Treasury will start selling immense amounts of new debt.
That will happen on the heels of this pending sham debt ceiling deal that Trump made with the Democrats on Wednesday. I'm still trying to wrap my mind around what this early deal will mean to us and the markets. I was expecting it to come only when the Treasury ran out of money at the end of September. Instead it looks like it will come very shortly.
We'll talk more about that next week. If the deal is really done, it's a far more important piece of news than the Fischer resignation.
About the Author
Financial Analyst, 50-year charting expert, finance + real estate pro, and market analyst; published and edited the Wall Street Examiner since 2000.