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- “Empirical” evidence disproving Wall Street…
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Dear Reader,
Once again… bad news for Main Street is good news for Wall Street.
CNBC, yesterday, announcing Main Street’s bad news:
- The labor market created far fewer jobs than previously thought, according to a Labor Department report Tuesday that added to concerns both about the health of the economy and the state of data collection.
- Annual revisions to nonfarm payrolls data for the year prior to March 2025 showed a drop of 911,000 from the initial estimates, according to a preliminary report from the Bureau of Labor Statistics. The total revision was on the high end of Wall Street expectations, which ranged from a low around 600,000 to as many as a million.
- The revisions were more than 50% higher than last year’s adjustment and the largest on record going back to 2002. On a monthly basis, they suggest average job growth of 76,000 less than initially reported.
A lowered revision of 911,000 jobs — 911,000 phantom jobs!
Bloomberg’s primary economist believes the walloping revision indicates the United States economy has wallowed in recession since last April.
Has it? I do not know.
I do — however — incline in that general direction. If not last April, then sometime since, I hazard.
Yet Wall Street took to yesterday’s news as arms merchants take to war declarations… or as the funeral industry takes to funereal notices.
I’m SO Sorry to Hear That
“Horrible news,” intones the arms merchant. “War means hundreds of thousands of lives — if not millions of lives — will be lost,” he sobs.
Meantime, he inwardly calculates his grotesque blood-stained profits.
“We deeply mourn the passing of Mr. Frank Watts,” sniffles the funeral parlor owner.. “He was a truly swell fellow who will be deeply missed by all who knew him,” he weeps.
“Now,” addressing his survivors in all insincerity, “may I please show you the custom casket worthy of such a loving and devoted husband and father?”
And so Wall Street sheds its crocodile tears on the ashes of Main Street.
That is because poor economic data induces the Federal Reserve to reduce its target rate.
Mr. Sal Guatieri of BMO Capital Markets:
- [The labor market] was materially weaker than the BLS initially estimated in the year to March 2025, giving the Fed another reason to lower rates next week.
Affirms a certain Oren Klachkin, he of Nationwide Financial:
- Importantly, the slower job creation implies income growth was also on a softer footing even prior to the recent rise in policy uncertainty and economic slowdown we’ve seen since the spring. This should give the Fed more impetus to restart its cutting cycle.
I hazard these fellows are correct — as does the wagering market.
Following yesterday’s news, CME’s FedWatch gave 94% odds of a rate reduction next week.
Thus the stock market was up and away on yesterday’s news. All three major indexes posted sizable gains.
That is because Wall Street is hot for easy money.
What’s Good for Me Is Good for You — Just Trust Me
Yet Wall Street would have Main Street believe that they share a common savior — the Federal Reserve.
That is, Wall Street would have Main Street believe that it too benefits from reduced interest rates and central bank lightening.
Does it?
The answer is a sharp and resounding no, says David Stockman. It is Wall Street’s self-serving moonshine.
Mr. Stockman once directed President Reagan’s Office of Management and Budget.
From whom:
- Since the year 2000, the inflation-adjusted money-market rate (i.e., Fed funds) has been negative — often deeply so — more than 80% of the time.
- Accordingly, the implicit thrust of Fed policy has been to severely punish savers, who, after taxes and inflation, have been badly crushed, and reward borrowers and speculators.
- The latter have essentially been offered free money on a short-term basis to fund their leveraged speculations via rolling over the Fed’s cheap overnight money day after day for years running.
“Empirical” Evidence Against Wall Street’s Claims
What is more, Mr. Stockman wields “empirical” evidence that sinks the theory that easy money fortifies Main Street:
- Well, here’s an empirical test that can’t be gainsaid… Between… March 1951 and August 1971, we had a gold-anchored monetary system and a Federal Reserve run with an exceedingly “light touch”…
- By contrast, after the gamblers of Wall Street brought the credit, housing, and equity markets down with the thundering crash in the fall of 2008, we had a rogue regime of massive money-printing and incessant, heavy financial market intervention by the Fed under Bernanke and his successors.
- There is no contest on the growth and prosperity front, however, between the two periods. Real growth as measured by real final sales of domestic product rose at a 3.83% annual rate during the “light touch” era of Q2 1951 to Q2 1971, while the growth rate was barely half of that level at 1.94% between Q4 2007 and Q2 2025.
Did you catch that? Under easy money, the growth rate was scarcely half.
Thus I have argued that the Federal Reserve’s soft money regime has yielded a reverse-Robin Hood effect.
It has famished the lower and middling classes while fattening the topmost classes.
Perhaps not intentionally — the Federal Reserve believes its mummeries about assisting Main Street.
It believes its brummagem about benefiting the lower and middle classes.
Yet as you know a man not by his intentions but his deeds… so shall you know the Federal Reserve — by its deeds.
And its deeds have advantaged Wall Street over Main Street.
Thus Main Street’s bad news is Wall Street’s good news.
Yesterday merely constituted additional proof.
Regards,
Brian Maher
for Freedom Financial News
