The Fed’s “Information Warfare”

  • Amusing reminder: “Betteridge’s law of headlines”
  • The Fed no longer has the stock market’s back
  • How Fed chair Jerome Powell routinely misled Congress
  • Lying to Americans in the name of “misinformation warfare”
  • A reader wonders if The 5 has “canceled” him.

We begin an otherwise grim edition of The 5 with an amusing reminder about “Betteridge’s law of headlines.”

As popularized in 2009 by the British technology journalist Ian Betteridge, the law tells us any headline that ends in a question mark can safely be answered “no.”


As we went to virtual press yesterday, the Federal Reserve released the minutes from its mid-March meeting.

We’re compelled again to remind you that Fed “minutes” are not like the minutes from your local school board meeting. They’re not an objective record of who said what. They’re a thoroughly political document designed to spin a narrative in financial markets.

The narrative from yesterday’s minutes affirms what we said at the start of 2022: The Fed no longer has the stock market’s back.

The Fed now hopes to rein in inflation by raising the fed funds rate in half-percentage point increments — not the piddly quarter-point steps we got used to in previous rate-raising cycles.

In addition, the Fed plans to start shrinking its swollen $9 trillion balance sheet next month — cleverly depicted on that Financial Times graphic above — to the tune of $95 billion per month.

That’s a lot of easy-money heroin the Fed will be withdrawing from its Wall Street junkies.

To emphasize: Each of these decisions was made during the Fed meeting on March 15–16. And they were kept secret for three weeks.

“The Fed believes transparency is a fundamental principle of central banking,” says a risible page on the Fed website.

“In the area of monetary policy, twice a year, the Federal Reserve submits an extensive report — the Monetary Policy Report — on recent economic developments and its plans for monetary policy.”

Right, but actual decisions are kept hush-hush, only to be disclosed by drip-drip. (And actual transcripts of the Fed meetings? Those are released on a minimum five-year delay.)

Back to that Fed web page: “The Federal Reserve is also transparent and accountable in its supervision of banks, operations of the payment system and in its other functions as well.”

Yeah, right: In reality, Fed chair Jerome Powell clearly misled Congress about the financial condition of the biggest banks during the early months of the pandemic and lockdowns.

“Throughout 2020,” write Pam Martens and Russ Martens and Wall Street on Parade, “Powell repeatedly testified to Congress that the banks in the U.S. had proven to be a ‘source of strength’ during the pandemic.”

But a week ago today, the Fed disclosed exactly who borrowed how much from its “Primary Dealer Credit Facility” starting on March 20, 2020 — emergency loans offered at a bargain-basement rate of 0.25%. The figures are included in a Fed report to Congress.

“It showed,” write the Martenses, “that at the end of the first 11 business days of operation, on April 3, 2020, the Fed had an outstanding balance in the PDCF of $49.5 billion and the trading unit of the largest bank in the United States, JPMorgan Chase, which perpetually brags about its ‘fortress balance sheet,’ had needed to borrow $14 billion of that $49.5 billion, or 28% of the total.” Citi was another big borrower.

This $49.5 billion figure is — or should be — a revelation.

Up to now, the Fed had told Congress that the banks had amassed $34.5 billion in outstanding loans as of April 14, 2020. That’s a substantially lower figure than the $49.5 billion outstanding nine days earlier — which is only now coming to light.

“It would appear that the Fed intentionally set out to mislead Congress,” the Martenses conclude. “Not only did the Fed not report the larger amount of $49.5 billion to Congress but it withheld it from its weekly H.4.1 balance sheet statements as well.

“Why hide the Primary Dealer Credit Facility information from Congress and the public? Because the trading units of JPMorgan and Citigroup were also borrowing vast sums of money from the Fed’s repo loan operations at the same time they were borrowing billions from the PDCF.”

Ah yes, the repo crisis: In September 2019, months before anyone knew anything about a new virus breaking out in China, the Fed was already extending loans to the megabanks’ trading arms — which had gotten into trouble with “repos,” or repurchase agreements.

It’s now apparent the repo mess still hadn’t been cleaned up by the time lockdown arrived.

But in the context of the present moment, maybe the Fed could justify all its obfuscation in the name of “information warfare.”

Which brings us to the war in Ukraine and a remarkable NBC News story yesterday…


Those claims a while back that Vladimir Putin was about to unleash chemical weapons on Ukraine? There was nothing to it. Ditto for the claim that Russia had asked China for military help. The U.S. “intelligence community” was lying to the American people on purpose.

“Multiple U.S. officials,” the story says, “acknowledged that the U.S. has used information as a weapon even when confidence in the accuracy of the information wasn’t high. Sometimes it has used low-confidence intelligence for deterrent effect, as with chemical agents, and other times, as an official put it, the U.S. is just ‘trying to get inside Putin’s head.’”

So we’re back to the “noble lie” — like the one at the outset of the pandemic about how masks were useless and besides, there was a shortage and the health care workers needed them. Oy…

Note how the media are willing accomplices in all these lies — including the financial ones.

Three months ago, when the Fed disclosed who was getting emergency loans at the outset of the repo crisis, not one mainstream outlet picked up on the story. It was up to the Martenses at Wall Street on Parade to sift through and make sense of the data — and folks like us to give it a platform, however small.

Meanwhile, anytime the Fed wants to issue an “authorized leak” to reinforce its narrative of the moment, The Wall Street Journal is ready, willing and able to amplify it. That’s been the case for over a decade now, first with reporter Jon Hilsenrath and now with Nick Timiraos. From there, it goes to CNBC, Fox Business and the rest of the echo chamber.

We write these daily missives with an eye toward helping you feather your nest — guiding you toward unorthodox ideas to preserve and grow your wealth.

It’s a task that’s always required wading through hip-deep quantities of informational sewage discharged by central bankers, politicians and Wall Street types who don’t have your best interests at heart.

But now it’s different. Pardon the language, but we’re navigating as best we can through one giant hall-of-mirrors mind**** psyop.

And even if our editors, gurus and analysts succeed in helping you win a rigged game, your winnings might be subject to confiscation with no warning.

But we’ll press on. At the very least, we’ll do our best to make sure you don’t get caught in the crossfire of “information warfare.”

For the moment, the Fed has not induced “mayhem” in the markets — just a third day of an orderly sell-off.

At last check, the Dow is down a half-percent to 34,321. The S&P 500 is likewise down about a half-percent to 4,460. The Nasdaq is down nearly 1%, retreating further from the 14,000 mark.

Again, an orderly decline: The S&P is down 7% from its record close on Jan. 3 — and still up substantially from its mid-March lows.

Crude is in severe retreat — a barrel of West Texas Intermediate now fetching $94, down $5 from this time 24 hours ago. No, there’s no obvious “news” — unless you count the expanding lockdowns in China, which will surely slow the wheels of global commerce more than they have already.

Precious metals are rallying, but not by much — gold at $1,935 and silver at $24.50. Cryptos are doing likewise — Bitcoin at $43,462 and Ethereum at $3,214.

We’re just about giving up on federal cannabis legalization giving a lift to pot stocks: Democrats appear more interested in posturing about legalization than getting it done.

As we mentioned on Monday, the House passed the MORE Act by a slender 220-204 margin, including only three Republicans. Meanwhile, Senate Majority Leader Chuck Schumer appears more interested in pushing through his own legalization bill.

Syndicated columnist Jacob Sullum writes that both bills are larded down with taxes and regulations — “unnecessarily contentious provisions that are bound to alienate Republicans who might otherwise be inclined to resolve the untenable conflict between federal prohibition and the laws that allow medical or recreational use of cannabis in 37 states.”

Indeed there are dozens of GOP lawmakers eager to let the states go their own way. A year ago, 106 of them voted for the SAFE Banking Act — a measure that would finally allow canna-businesses to get access to the federally regulated banking system.

“The SAFE Banking Act,” Sullum writes, “would already be law if it had not been blocked by Schumer, who insisted that his own bill take priority.” And it’s not as if Schumer’s got 10 Republican votes to overcome a filibuster, right?

Sullum’s inescapable conclusion: “Democrats want credit for trying to legalize marijuana but are not really interested in building the bipartisan coalition that would be necessary to accomplish that goal.”

To the mailbag, and a reader who wonders if we’ve “canceled” him…

“I routinely send comments to The 5. You formerly welcomed them, but for some reason I have been PNG’d over the past year or so, even though my comments are valuable to the discussion at hand and born of direct experience. Nevertheless, I offer two more:

“Ethanol is NOT a cleaner fuel, so efforts to make it part of clean air initiatives are frankly BS in any configuration. The energy content in ethanol is only 60% that of regular gasoline, so an engine has to burn far more of it to achieve the same output.

“Modern computer-controlled ignitions adjust to the lack of energy because they read the power output and simply supply more fuel, so that your tank ends up empty sooner. This is not conjecture but chemical fact and can be easily verified.

“Automakers don’t care what you put in your tank, but if you read your owner’s manual (and almost no one does) you will see recommendations against the use of ethanol, since it not only provides less performance, but because it attracts and holds water, does long-term damage to the engine and fuel components.

“Aircraft engines are not permitted to use ethanol at all, and in Europe, rental car agencies forbid ethanol in their cars. Since service stations are not self-serve there, attendants will not sell you ethanol/gasoline. Transport Canada outlawed ethanol over ten years ago because it actually produces more emissions, and American use of ethanol is a popular joke in Canada. I lived there five years, and I worked 30 years as an automotive engineering executive.”

The 5: To anyone who writes regularly: Please don’t take any perceived exclusion from our mailbag section personally.

Sometimes the press of events is such that there’s just not room for even high-quality feedback. Other times, we might have trouble making out your argument — which is why we excluded your second comment today. (You’re welcome to revise and extend your remarks and try again — feels like you’re onto something interesting!)

Meanwhile, pity anyone who puts ethanol-laced gasoline into a lawnmower or snow blower — or anyone who doesn’t live in a place where ethanol-free premium is readily available. (The pure-gas website can help find a retailer near you.)

Best regards,

Dave Gonigam
The 5 Min. Forecast

Dave Gonigam

Dave Gonigam

Dave Gonigam has been managing editor of The 5 Min. Forecast since September 2010. Before joining the research and writing team at Agora Financial in 2007, he worked for 20 years as an Emmy award-winning television news producer.

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