Former Fed Insider DiMartino Booth: 'Powell Needs to Stop Lying to the American People'
Summary
Market Outlook: The guest argues markets are overreacting to the Fed’s liquidity operations, incorrectly interpreting them as a return to full-blown QE.
Quantitative Easing: She stresses genuine QE requires the policy rate at the zero bound and warns past balance-sheet expansions created distortions and inequality.
US Treasuries: Discussion centers on Fed purchases of short-dated Treasuries to maintain market plumbing and longer-term risks to the risk-free status if the balance sheet balloons again.
Economic Risks: Rising bankruptcies, a squeezed middle class, and high unemployment among recent college graduates highlight mounting structural pressures.
AI: AI is seen as a disruptive force eliminating entry-level roles and demanding extreme specialization across professions, with long-run labor market implications.
Policy and Independence: She calls for the FOMC to assert independence, potentially electing its own chair, and advocates narrowing the Fed’s mandate to price stability.
Opportunities and Speculation: Liquidity injections may push stocks higher short term, but the guest cautions this exacerbates inequality and is not a sustainable policy path.
Stock Picks: No specific tickers were substantively pitched by the guest; the focus stayed on macro policy and systemic risks.
Transcript
Hey everyone, welcome back to another special in-person episode of the Julia Larose show where we are joined by none other than Danielle D. Martino Booth. She is the CEO and chief strategist at Qi Research, author of the book Fed Up. And Danielle, this is the last FOMC meeting of 2025, The Super Bowl. It's over. >> The 2025 one's over, sister, but we got three more with Jay Powell at the podium. >> We have three more. That is right. So before I get into this incredible open letter that you wrote today, let's just start with reaction first to what we saw at the FOMC day. FOMC today base point rate cut. >> The interpretation by the masses was we really don't care about the economy. We're relaunching QE. >> Um and so that it was it was really the fine print about you know we don't have ample reserves anymore. or the Fed knows that, you know, when when it comes time for people to pay their income taxes, um that uh that that money goes up in the Treasury General account, which is like the nation's checking account that's held at the Fed. They know that liquidity is going to be a problem into the end of the year where overnight rates have have been spiking even into month end. And they know that liquidity could be a real problem through the first quarter. So they're in order to manage the amount of liquidity in the system, they'll be buying, you know, $40 billion uh of of of treasuries with maturities less than than three years. The reason I talk about this is because that's all the markets care about right now. They're like, the Fed's going to launch QE again >> without calling it QE. It's like, >> well, no, no, no. I mean, what they're doing right now is not QE. Um, but last time they made a baby step, it ended up doubling the size of the Fed's balance sheet >> because one thing led to another. But, you know, we forget that the Fed needed a global pandemic to launch QE because at the time the Fed was saying in 2019 when the US economy was falling into recession, the Fed was in a similar state of denial at the time and saying the US economy is just fine. As long as the Fed's saying the US economy is just fine, they can't launch QE because they can't launch QE unless they bring the Fed funds rate down to zero when we're sitting here hemming and hawing and debating 25 or 50 basis points. They'd have to go from three and a half% to the zero bound in order to relaunch QE. That's the reality of it. >> Wait, so then what are they doing then? >> They're managing liquidity in the system, Julia. >> Okay. >> Okay. >> But that's not how markets are interpreting it. They're like, we're going to the moon, baby. they're going to launch QE. >> Are they getting it wrong in the markets or the interpretation? >> I think right now the markets are overreacting. >> Okay. >> Basically, um because full-blown QE means the Fed going all the way out the curve. >> Mhm. >> And you know, buying if need be the long bond. So, but that is a no bueno situation for the US economy. >> Okay. Let's talk about this open letter that you wrote this morning to the Federal. I wrote it yesterday morning starting at like 4:04 a.m. >> Okay. I got it early this morning. >> It was literally burning a hole in me. I could to to the extent that I couldn't sleep. >> So, okay. So, you wrote this yesterday. >> Mhm. >> Tuesday, 4 in the morning, your time. I guess the question is why? Why? What was it? Have you been I take it you've been thinking about this for a while. >> Well, I mean, everybody's like, who is President Trump going to nominate? And if you read the Federal Reserve Act, it actually doesn't matter. It doesn't matter who he nominates because he can only nominate somebody who's going to be confirmed by the Senate and appointed to the Federal Reserve Board. The only individuals that any president can nominate are governors on the Federal Reserve Board of Governors. Now, the reason I wrote this manifesto is because there is the legal avenue, perfectly legal. It's in the Federal Reserve Act. In January of every year, at the very first FOMC meeting, the 19 members of the Federal Open Market Committee, including all 12 Reserve Bank presidents, vote for the chair and the vice chair of the Federal Open Market Committee. That individual is the person at the podium after every Fed meeting. By tradition, that person has always been the person who's always been elected has been the chair of the Federal Reserve. But that is not a requirement. In other words, they could have met, you know, after Nixon put Arthur Hayes in place because he needed a yes man to make monetary policy easy. That doesn't sound like a parallel with the current times. the the Federal Open Market Committee once Arthur Hayes started being a yes man to Nixon could have voted for a different chair of the Federal Open Market Committee. That's the right that they had when Arthur Hayes was letting inflation run haywire because he was cowtowing to Richard Nixon. >> But they didn't. And traditions always held that they don't. But that doesn't mean that they can't. >> They they could break tradition then. >> They could break tradition. They could they could nom they could elect Lisa Cook to be chair of the Federal Open Market Committee. They could put Lisa Cook at the podium for the next 12 months depending on how the Supreme Court rules. But my point is they could elect any of the 19 members of the FOMC to be chair. They don't have to follow tradition and have the vice chair necessarily be the president of the New York Fed. That is tradition, but it's not the law. Okay. How? This is interesting. I actually did not know this until your letter this week. >> That's why it was burning a hole in my brain because everybody's like, "Oh my god, who's going to be the next chair?" And I'm like, "We don't necessarily have to worry about that." You could have somebody circumvent >> whoever the president chooses to be the the leader of the Federal Open Market Committee that sets monetary policy. The Federal Reserve Board only sets interest paid on excess reserves and the discount rate which is the rate at which banks it's the emergency lending rate for a bank if it has to go to the discount window for the purposes of getting emergency funding from the Fed. That's all the Federal Reserve Board legally can do. Mhm. >> Interest rate policy is the purview of the Federal Open Market Committee. >> Got it. Okay. So, um a lot of folks, betting markets for example, um prediction markets, they are expecting Hasset, Kevin Hasset. Okay. >> Do you think he would be the wrong choice then? I think that the reason that we saw a backup in yields this week was that the week started with Kevin Hasset going on CNBC >> and saying no Federal Reserve chair has it in their power, including me, to make monetary policy 6 months out. So he basically said, I'm Powell. >> Mhm. Now I he also said he believed that interest rates needed to be lowered by 50 basis points at the current meeting like Steven Myron. But he also said just like Powell, I will be data dependent. >> Okay, >> I will preserve my integrity and it was an an implicit message to President Trump. If you can't handle that, >> if you're going to force me to sacrifice my professional integrity, then I'm not your man. >> Okay. Well, I wonder if that changes things then. >> Well, the betting markets did tick down after Monday. It's still got him as the front runner, >> but you do see a turn in betting markets after that CNBC interview. >> I do wonder like no matter who President Trump picks, you kind of wonder like when you're in the institution and you're at the Fed, wouldn't if in that role Fed chair, wouldn't you just like think about your own legacy, not the political side of things? >> That's what Hasset said. Okay. Okay. That's exactly what Hasset said. >> He said, "I'm not a yes man. >> You cannot plant me in the Federal Reserve and expect for me to be the next Arthur Hayes." Can't do it. >> How about um how do you square calling for a leadership change with preserving Fed independence? Again, what the Fed is being threatened with is having a political pathy confirmed by the Senate to be their next leader. But they have it in their power to elect the next leader of the Federal Open Market Committee. And it does not have to be the individual that Trump puts in the place of chair of the Federal Reserve Board. >> Okay. So, your letter that you put out this morning was titled, "Every hardworking American who wakes up in the morning asking themselves what went wrong." That is the dedication of fed up. It's the second time that I've written those words in my life. >> Mhm. >> There are still a lot of Americans waking up and asking what went wrong. If you're not in the top 10 percent and you're not shopping at at Hermes for Christmas shopping for your yard man, if you're that other 90%, that's who I wrote this letter on behalf of. >> Talk to me about what went wrong. I wrote Fed Up 10 years ago. 10 years ago, I was putting it at the Fed's doorstep that since Alan Greenspan had been in office, they were specifically making monetary policy for the top 10%. That the Fed was widening the inequality gap that has become so pernitious in this country that has been so divisive since I wrote that book. It's just gotten worse. And yet we saw markets take off today because they were like, "Fed's going to pump liquidity into the market, baby. Top 10%'s going to get even richer." >> It's not the Fed's job to make the rich richer. It never was. >> Yeah. Um, if you could redesign the mandate, >> what would you do differently? >> The Fed has no business having two conflicting mandates. They necessarily maximize employment, minimize inflation. They necessarily conflict. You want to maximize employment, run the economy hot, let inflation rip. You want to minimize inflation, slow the economy down. I think that the decision in 1977 to reopen the Federal Reserve Act to add the employment mandate was a mistake that needs to be retracted by Congress. The Fed needs to go back to safeguarding the buying power of the US dollar and being lender of last resort in times of absolute financial emergencies and that's it. But that is an act of Congress. And by the way, let's just say let's just say that the 19 members of the Federal Open Market Committee exercise their power to vote on January the 28th and elect somebody other than other than who Trump is going to place as Fed chair. Mhm. >> Should they choose to do that and presumably the president loses his mind, it would still take an act of Congress to revoke the voting authority of the 19 individuals on the Federal Open Market Committee. >> Yeah. I see. You're the first person who pointed this out to me at least. Like I didn't know this was an option. It's you can pull it up on the Fed's website. >> No, I believe you. No, that's the thing is you're you were a Fed insider at the Dallas Fed. Like that's >> you know it um >> the reason I had to write this >> is because in my lifetime at least I wasn't following monetary policy when Arthur Hayes was in office. I wasn't even alive. Um, [clears throat] we haven't needed this option in our lifetimes because we haven't had eight out of 12 district presidents vote against lowering the discount rate. We haven't had this level of dissent in my lifetime. >> Mhm. >> We have it now. >> And that's that's unusual then the descent. It is unusual to see this level of dissense and persistent. It is unusual to have such division on the Federal Open Market Committee. And in this particular case, I think that there's a justification for the members saying, you know what, we believe Christopher Waller is going to be the most balanced individual. He doesn't believe in quantitative easing. He doesn't believe in the zero bound. We think that those were policy failures. So, we're going to elect Christopher Waller. I'm just using a hypothetical. >> But I think now is the time for them to exercise their right to vote. This episode is brought to you by Van X Rare Earth and Strategic Metals ETF, ticker symbol REMX. Rare Earths are the hidden backbone of modern technology and defense, powering everything from smartphones and electric vehicles to fighter jets and wind turbines. Van Ec recognized this early, launching the rare earth and strategic metals ETF, ticker symbol REMX, 15 years ago, well before supply chain security became a global priority. Today, China dominates the production and refining capacity of rare earths, creating real challenges for global supply chain security as these materials are essential for technological innovation, clean energy, and national security. That's why countries all around the world are racing to build their own supply chains and reduce reliance on China. As this global shift continues, investment in the rare earth ecosystem is growing rapidly from mining to advanced manufacturing. Investors can gain access to this powerful trend through REMX. Visit vanck.com/remx Juliia to learn more. Okay. So, let's go back into a little bit of history, too. Like, in the letter, you also talk about Bernani back in 2007. You also talk about even what Pal was warning about back in 2012. >> 2012, he'd only been on the he'd only been a governor for four months. He was a baby. He was a rookie on the committee. And yet, he was adamantly, passionately against >> QE, >> passionately. Some say that I put that in there to remind the public what a hypocrite he is. Maybe. I think I quoted him because he was speaking the truth then. >> Mhm. >> But and I quote Bernanki. Well, I I referenced the Bernanki doctrine >> because a that was a violation of the Federal Reserve Act. You cannot make a decision of that magnitude without a quorum. And yet he was able to pull into a conference room in Jackson Hole, just a small codery of his closest confidants. And there at that meeting in August of 2007, the decision was made, should we be forced, I mean August 2007, my god, the world was ending. You know, a year later, Lehman failed and the Fed I mean I was there at the time. The Fed knew what was coming. And yet my boss at the time, Richard Fischer, wasn't in that room, but he was at Jackson Hole. Mhm. >> That violated the Federal Reserve Act >> that they didn't have everybody who had a vote on the Federal Open Market Committee present at the meeting in which it was decided the Bernani doctrine. If we're going to launch quantitative easing, if we're going to launch large-scale asset purchases, we must first have the Fed funds rate be at the zero bound. That was decided without a full quorum of Fed officials. >> Okay. And when if they're in violation, too, is there even a consequence to that? It wasn't it wasn't written necessarily. It wasn't published, >> right? >> Um but I can damn well guarantee you that Random Houses's attorneys made me fact check it six ways to again like I believe you. That's the thing is >> to get into fed up. It happened. The meeting occurred. >> Okay. And they're in violation of the Federal Reserve Act. Yet it's also like I hear other people will say this. They're violating the act. Is there ever a consequence to violating the Federal Reserve Act? >> Not as long as the rich get richer. Oh man. Okay. So, is this an opportunity then for there to be a reset for the Fed because you wrote fed up? Why the Federal Reserve is bad for America? I can't remember. Is that the full headline? >> It is. >> Okay. Is this a moment you think there's an opportunity? We can change the subtitle with the sequel. Fed up. Why the Federal Reserve was bad for America instead of is bad for America. We can make it into a was the Fed can exert its independence. The Fed should exert its independence. I mean Turkey has central bank chairs who are installed by Turkish presidents and that's why we call them third world countries. >> The Fed knows this. Members of the committee know this. They complain about it. As soon as you know, black FOMC blackout's over, they'll all be at some podium or at on some TV set blah blah blah with their opinion. >> We'll get the Fed speak. >> If you're so pissed off, do something about it. Vote. Vote on January the 28th. >> Mhm. Well, you and I will be together um for the FOMC in January so we can have hopefully an update um hopefully an update here to this. I >> hopefully I'm still here if the president hasn't put a hit out on me by [laughter] them writing today. >> I mean like maybe they'll >> I'm like, "Oh my god, there's a price on my head." >> No, not at all. Maybe they'll read your letter. You sent it to them, so maybe they'll read it and it's been everywhere today. I've seen a lot of folks talking about X. Um >> I guess question for you is if the market thinks we're going to have QE, which we're not, or you don't you don't think we will. Is it QE not QE? like just to use a different term. >> Well, it's an injection of liquidity into the system to ensure the financial plumbing continues to operate as need be because the Fed's worried that liquidity is dried up. >> So, >> and again, >> when it was not QE a few years ago and I was getting slaughtered on the social media platform formerly known as Twitter, it was not QE then. >> Yeah. >> But injecting liquidity by buying securities I'm sorry. >> Will they ever call it QE again or they just use something like injecting liquidity? Whatever. >> Oh, the Fed's not going to use that. No, they assured the markets today. It was in the verbiage. I've got the statement right there that this is solely >> solely to ensure that the financial plumbing continues to operate >> that there's ample liquidity in in a situation where the ample reserves have been run down. There's no more balance in the RRP. the reverse repo >> just to keep operational efficiency in the markets. >> Yeah, the markets and the markets like it. So >> Oh, the markets liked a lot. >> Yeah, but that's not representative of the hardworking Americans as you point out. >> It's not. It's rep It's representative of stocks are going to rip even higher because the Fed's going to inject liquidity into this so that speculators can continue to rape and pillillage average everyday working American. for him to stand at the podium today. For Powell to stand at the podium today and you know it took something for me to say it's time for a leadership change because that was pointed at Jay Powell when he gets up at the podium and says that he's making monetary policy for all Americans. Somebody needed to say and I said >> That was what it was about. He needs to stop lying. >> Yeah. What do you think his legacy will be >> right now? Not very good. Mhm. >> I mean, think about October of 2012 when he said, "You know what? It's going to be really hard to extricate ourselves from QE if we keep going down this path." Correct. Jay Powell, you are absolutely correct in October of 2012. And then you shepherded the largest expansion of the Fed's balance sheet in the history of mankind. >> Do you think his legacy will be worse than Arthur Burns? >> I don't know. Um, I mean, Arthur Burns let inflation run haywire. >> Jay Powell's ignoring layoffs and people suffering. >> I mean, I guess that's two sides of a coin, right? Suffering is suffering. >> What do you make of the trajectory of the economy? You in the in the in the letter, you also reference Mike Green. Mike Green was actually just in studio earlier today. >> Mike Green in the house. Okay. >> Yeah, Mike Green was in the house today. Um, first time meeting him in person, but we talked about his super viral piece. Mhm. >> on what the real poverty line is like in America and how middle class has just been >> crushed. It's basically $100,000. >> Yeah. $100,000. And if you live in Essex County, New Jersey, like close to 140. And I imagine here in the city even higher than that. >> My my running joke is if you're if you're in the city, you need to be a billionaire with a B because a millionaire is just not getting by. >> Okay. I said that earlier. I was a little like nervous and like this like okay when I was recording with him, I was like I feel weird saying like a million's not as much as like when I was a I was like, "Oh my gosh, million dollars. You're set for life." Not in New York City. >> Mm- >> No. Not Not when your rent's like 100,000 a month. No. >> That's crazy like saying I feel weird saying it, but I'm like, "Yeah, even I think he really hit a nerve though that 100,000 140. These aren't luxurious lives. It's like >> they are." And that's why I the one the sole graphic that I put into my manifesto was the increase in government transfer payments as a percentage of GDP. Fed policy is eviscerating the middle class that Mike Green rightly identifies as being today's impoverished. You think, okay, so the blame lies at the Fed then >> or well, they've enabled all this expansion of fiscal spending. >> They've had how many campaigns of lower for longer that's allowed the Fed to expand the social safety net to where you're in good shape if you're really poor because you're the recipient of all of these 81 programs >> that are out there if only if you're poor enough. you have the safety net and then it's like the working poor that like it's almost like what's the incentive to even get out of it if like you're going to struggle and have to pay more and all. >> That's exactly right. And what's the incentive for Congress to even pull back on that spending because it buys votes. >> And what does that say about the trajectory of where we're headed? Like what are the longer term consequences of this? >> Well, I don't know because we're telling people not to work. >> Yeah. But I also think it's got to have long-term consequences because one of the other things is you're not seeing people form as many families or have kids. I bet if you >> they're angry. They're angry. I mean, now everybody's like, "Let's go President Nuome >> because the pendulum >> swings back the other way." >> It probably doesn't fix the problem either. >> Yeah, >> it doesn't. All that does is expand social spending even more. And I mean, right now the solution is to move out of California. >> If you can't afford to pay all those taxes, >> people going to leave the country. >> They're going to go to tax. >> And you know what? By the way, Green's right. At a federal level, we're paying less as a share. >> Mhm. >> The wealthy. >> Mhm. >> Taxes do need to go up some. It's true. Um but certainly not on the working. He got He got a lot of criticism, too, like from Well, he got a lot of praise, too. I will say this. He got a lot of He got a lot of criticism from think tanks. >> Elitist. >> He did. He got a lot of he got a lot of criticism from thinks that benefit by all of the money that's spent on Capital Hill for them to dream up the next social program. >> Yeah. All of these like smart people who come on this show, they all were sharing the the piece like really smart people that I respect much more than I respect someone at a think tank um were saying like how they loved the piece. And then what I really liked was when the Washington Post wrote it up, they did a AI summarization of the thousands of comments and the sentiment was this is my reality. This is my life. I think he really hit the nail on the head. >> And you're someone who's been amazing at undercovering uncovering these kind of hidden narratives that are out there, >> especially on the labor side of things. >> Where do you where do we stand today? Like what is the update for >> I mean college graduates The unemployment rate for college graduates is pushing 10%. >> 10%. >> That's really scary for those who are graduating degrees. That makes me wonder, is that the highest it's ever been for >> No, but it has been higher in >> college degrees. So, where was >> it? Has been higher in severe severe recessions >> like I'm thinking financial crisis, but >> and we're not even in a crisis. That's what that's what scares me, Danielle, is we are not in a financial crisis situation or at least it's not acknowledged. I know you talked about we've only had 717 bankruptcies this year, the highest level in 15 years. But we don't talk about that either. >> What happens when we are in a crisis situation if it's already 10% now? >> Exactly what that portfolio manager said last night. Fed's balance sheet's going to 10 trillion. Print print maybe. >> And then they're just going to write >> the underlying cause. Even if there's a Doge dividend or whatever the hell you want to call giving 2,000 people, giving people $2,000 checks in in an election year next year. It's I mean, by Dollar General, >> not even though that would Yeah. >> Huh. Oh gosh, that's a it's a worrisome thought. And when I think about the young folks that you've talked about, the college grads, it almost feels like are the companies just not hiring at that at that level because your entry- level job, your internship, it's so important. Is that just their way of like not doing, you know, AI is coming to take jobs? Maybe one way rather than doing layoffs is reduce the number of people you're bringing in out of school. It's certainly what's happening. And I actually um one of my daughter's college essays, she just applied to a program um was about the effect of AI and what she wrote was was really telling. She said in the future, you're not going to be able to be an attorney. You're going to have to be a master litigator in the future. You're not going to be allowed to be AI is not going to allow you to be an accountant. You'll have to be a forensics specialist. In the future, AI is not going to allow you to just be a doctor. You're going to have to be an instinctive healer. and in the future she wants to go into finance. I'll have to think of the next generation of a stock or a bond because AI can replace plain old finance undergraduates too. And I'm like a I just got chills. Wow. This is my just turned 18 on Pearl Harbor Day Sunday. But she's right. Yeah. Like there it's expectation that everyone's going to have to be like an extreme expert. And that also makes me wonder too, and I think about when I first started my career, >> I was a journalist and it was like, well, really when I started it was pulling wires and transcribing other reporters interviews because there was no AI back then. But you did the grunt work and you learned along the way and you kind of grew. It's like almost like an apprenticeship in your career >> and it gives you a better appreciation for >> your art >> for being a member of the fourth estate. Yeah. >> But you mean to pose your own question, what does it mean that they're not going to go through those motions? >> Yeah, that is worrisome. >> And how how how much pressure does it introduce that they have to be the best of the best of the best to outthink the machines? >> And how do you do that if you don't get like the real world experience? Maybe our call to action is if you can hire a young undergraduate. >> Oh, >> please. I mean, I I I say it on every day. Every day people like, "When is this going to end? When are we going to stop seeing all-time highs in stocks and all-time highs in anger >> for working people?" And I'm like, when we figure out the the proposition, the math, the formula to pay people a living wage and not be greedy as corporations. And when we educate everybody from the ground up, >> what's your um biggest fear around how all this ends? Like how do you I I mean I take it this is a real risk. How do you [sighs] how do you think about how this ultimately plays out? What what makes you fearful or worried? And then let's do the other side of it and how could we get out of this? What would be the path forward? So >> you know, you've got all baby boomers in retirement by 2029. >> 2029, that's just around the corner. So going to the zero bound again, it ain't going to do what it once did and it's going to make a lot of retirees nervous. >> Explain that real quick. >> Well, they I mean they they've had 1.75 percentage points of what they were earning on their cash is now gone. >> Um so this zero bound is not going to work as well as it did because of the aging of America. Um, and at some point, at some point, the rest of the world could push back on the US Treasury being the risk-free asset. If we're like, if we're say, let's, you know, let's do QE and get the balance sheet from 6 to 10. Why not six to 20? I mean, you end up putting the risk-free status of the US Treasury at risk, which actually puts democracy at risk worldwide. That's the risk. >> What do you think is the way out then? >> I really that it's it's why I wrote the open letter. Um, somebody's got to be honest with the American people and say, "We have to get off this roller coaster. We have to stop the money printing. We have to stop making monetary policy just for the 10%." Maybe there'll be an ugly recession in between, but we have to get past the point where monetary policy is being made for a smaller and smaller and smaller percentage of Americans as a factor of time. If we don't, we're going to land in civil war. So I think step one is just the cleansing of sunlight, honesty, truth in monetary policym. If Congress wants to spend a bunch of money and say Fed, print it, the Fed should be able to say no, we're independent. We do not have to do your bidding and we're not going to. We've got to get there. >> Before I let you go, Danielle, parting thoughts. What would you like this audience to think about, take away from this conversation? If you haven't read it, and this is not self- serving. >> Oh, no. They should read it. We're going to link to it. >> If you haven't read it, read it. Call your congressman. Call your Congress woman. Call your senator. Remind them that you're their constituent and that you want for them to advocate for an independent fed. Call your senator and say if a pathy's nominated to replace Jay Powell, don't confirm him or her. I think we have to take control of the country back and it's going to start with taking control of the money back. >> Daniel D. Martino Booth, chief strategist and CEO of QI um research, author of the Daily Feather on Substack. I'm a subscriber. Go subscribe. And author of the book Fed Up: Why the Federal Reserve is Bad for America, friend of this show. We really appreciate you. We always love our conversations. It's been so wonderful spending all of the FOMC meetings with you this year and I look forward to seeing you in January. >> I do as well. And happy holidays, Julie. >> Happy holidays. Merry Christmas. >> Merry Christmas.
Former Fed Insider DiMartino Booth: 'Powell Needs to Stop Lying to the American People'
Summary
Transcript
Hey everyone, welcome back to another special in-person episode of the Julia Larose show where we are joined by none other than Danielle D. Martino Booth. She is the CEO and chief strategist at Qi Research, author of the book Fed Up. And Danielle, this is the last FOMC meeting of 2025, The Super Bowl. It's over. >> The 2025 one's over, sister, but we got three more with Jay Powell at the podium. >> We have three more. That is right. So before I get into this incredible open letter that you wrote today, let's just start with reaction first to what we saw at the FOMC day. FOMC today base point rate cut. >> The interpretation by the masses was we really don't care about the economy. We're relaunching QE. >> Um and so that it was it was really the fine print about you know we don't have ample reserves anymore. or the Fed knows that, you know, when when it comes time for people to pay their income taxes, um that uh that that money goes up in the Treasury General account, which is like the nation's checking account that's held at the Fed. They know that liquidity is going to be a problem into the end of the year where overnight rates have have been spiking even into month end. And they know that liquidity could be a real problem through the first quarter. So they're in order to manage the amount of liquidity in the system, they'll be buying, you know, $40 billion uh of of of treasuries with maturities less than than three years. The reason I talk about this is because that's all the markets care about right now. They're like, the Fed's going to launch QE again >> without calling it QE. It's like, >> well, no, no, no. I mean, what they're doing right now is not QE. Um, but last time they made a baby step, it ended up doubling the size of the Fed's balance sheet >> because one thing led to another. But, you know, we forget that the Fed needed a global pandemic to launch QE because at the time the Fed was saying in 2019 when the US economy was falling into recession, the Fed was in a similar state of denial at the time and saying the US economy is just fine. As long as the Fed's saying the US economy is just fine, they can't launch QE because they can't launch QE unless they bring the Fed funds rate down to zero when we're sitting here hemming and hawing and debating 25 or 50 basis points. They'd have to go from three and a half% to the zero bound in order to relaunch QE. That's the reality of it. >> Wait, so then what are they doing then? >> They're managing liquidity in the system, Julia. >> Okay. >> Okay. >> But that's not how markets are interpreting it. They're like, we're going to the moon, baby. they're going to launch QE. >> Are they getting it wrong in the markets or the interpretation? >> I think right now the markets are overreacting. >> Okay. >> Basically, um because full-blown QE means the Fed going all the way out the curve. >> Mhm. >> And you know, buying if need be the long bond. So, but that is a no bueno situation for the US economy. >> Okay. Let's talk about this open letter that you wrote this morning to the Federal. I wrote it yesterday morning starting at like 4:04 a.m. >> Okay. I got it early this morning. >> It was literally burning a hole in me. I could to to the extent that I couldn't sleep. >> So, okay. So, you wrote this yesterday. >> Mhm. >> Tuesday, 4 in the morning, your time. I guess the question is why? Why? What was it? Have you been I take it you've been thinking about this for a while. >> Well, I mean, everybody's like, who is President Trump going to nominate? And if you read the Federal Reserve Act, it actually doesn't matter. It doesn't matter who he nominates because he can only nominate somebody who's going to be confirmed by the Senate and appointed to the Federal Reserve Board. The only individuals that any president can nominate are governors on the Federal Reserve Board of Governors. Now, the reason I wrote this manifesto is because there is the legal avenue, perfectly legal. It's in the Federal Reserve Act. In January of every year, at the very first FOMC meeting, the 19 members of the Federal Open Market Committee, including all 12 Reserve Bank presidents, vote for the chair and the vice chair of the Federal Open Market Committee. That individual is the person at the podium after every Fed meeting. By tradition, that person has always been the person who's always been elected has been the chair of the Federal Reserve. But that is not a requirement. In other words, they could have met, you know, after Nixon put Arthur Hayes in place because he needed a yes man to make monetary policy easy. That doesn't sound like a parallel with the current times. the the Federal Open Market Committee once Arthur Hayes started being a yes man to Nixon could have voted for a different chair of the Federal Open Market Committee. That's the right that they had when Arthur Hayes was letting inflation run haywire because he was cowtowing to Richard Nixon. >> But they didn't. And traditions always held that they don't. But that doesn't mean that they can't. >> They they could break tradition then. >> They could break tradition. They could they could nom they could elect Lisa Cook to be chair of the Federal Open Market Committee. They could put Lisa Cook at the podium for the next 12 months depending on how the Supreme Court rules. But my point is they could elect any of the 19 members of the FOMC to be chair. They don't have to follow tradition and have the vice chair necessarily be the president of the New York Fed. That is tradition, but it's not the law. Okay. How? This is interesting. I actually did not know this until your letter this week. >> That's why it was burning a hole in my brain because everybody's like, "Oh my god, who's going to be the next chair?" And I'm like, "We don't necessarily have to worry about that." You could have somebody circumvent >> whoever the president chooses to be the the leader of the Federal Open Market Committee that sets monetary policy. The Federal Reserve Board only sets interest paid on excess reserves and the discount rate which is the rate at which banks it's the emergency lending rate for a bank if it has to go to the discount window for the purposes of getting emergency funding from the Fed. That's all the Federal Reserve Board legally can do. Mhm. >> Interest rate policy is the purview of the Federal Open Market Committee. >> Got it. Okay. So, um a lot of folks, betting markets for example, um prediction markets, they are expecting Hasset, Kevin Hasset. Okay. >> Do you think he would be the wrong choice then? I think that the reason that we saw a backup in yields this week was that the week started with Kevin Hasset going on CNBC >> and saying no Federal Reserve chair has it in their power, including me, to make monetary policy 6 months out. So he basically said, I'm Powell. >> Mhm. Now I he also said he believed that interest rates needed to be lowered by 50 basis points at the current meeting like Steven Myron. But he also said just like Powell, I will be data dependent. >> Okay, >> I will preserve my integrity and it was an an implicit message to President Trump. If you can't handle that, >> if you're going to force me to sacrifice my professional integrity, then I'm not your man. >> Okay. Well, I wonder if that changes things then. >> Well, the betting markets did tick down after Monday. It's still got him as the front runner, >> but you do see a turn in betting markets after that CNBC interview. >> I do wonder like no matter who President Trump picks, you kind of wonder like when you're in the institution and you're at the Fed, wouldn't if in that role Fed chair, wouldn't you just like think about your own legacy, not the political side of things? >> That's what Hasset said. Okay. Okay. That's exactly what Hasset said. >> He said, "I'm not a yes man. >> You cannot plant me in the Federal Reserve and expect for me to be the next Arthur Hayes." Can't do it. >> How about um how do you square calling for a leadership change with preserving Fed independence? Again, what the Fed is being threatened with is having a political pathy confirmed by the Senate to be their next leader. But they have it in their power to elect the next leader of the Federal Open Market Committee. And it does not have to be the individual that Trump puts in the place of chair of the Federal Reserve Board. >> Okay. So, your letter that you put out this morning was titled, "Every hardworking American who wakes up in the morning asking themselves what went wrong." That is the dedication of fed up. It's the second time that I've written those words in my life. >> Mhm. >> There are still a lot of Americans waking up and asking what went wrong. If you're not in the top 10 percent and you're not shopping at at Hermes for Christmas shopping for your yard man, if you're that other 90%, that's who I wrote this letter on behalf of. >> Talk to me about what went wrong. I wrote Fed Up 10 years ago. 10 years ago, I was putting it at the Fed's doorstep that since Alan Greenspan had been in office, they were specifically making monetary policy for the top 10%. That the Fed was widening the inequality gap that has become so pernitious in this country that has been so divisive since I wrote that book. It's just gotten worse. And yet we saw markets take off today because they were like, "Fed's going to pump liquidity into the market, baby. Top 10%'s going to get even richer." >> It's not the Fed's job to make the rich richer. It never was. >> Yeah. Um, if you could redesign the mandate, >> what would you do differently? >> The Fed has no business having two conflicting mandates. They necessarily maximize employment, minimize inflation. They necessarily conflict. You want to maximize employment, run the economy hot, let inflation rip. You want to minimize inflation, slow the economy down. I think that the decision in 1977 to reopen the Federal Reserve Act to add the employment mandate was a mistake that needs to be retracted by Congress. The Fed needs to go back to safeguarding the buying power of the US dollar and being lender of last resort in times of absolute financial emergencies and that's it. But that is an act of Congress. And by the way, let's just say let's just say that the 19 members of the Federal Open Market Committee exercise their power to vote on January the 28th and elect somebody other than other than who Trump is going to place as Fed chair. Mhm. >> Should they choose to do that and presumably the president loses his mind, it would still take an act of Congress to revoke the voting authority of the 19 individuals on the Federal Open Market Committee. >> Yeah. I see. You're the first person who pointed this out to me at least. Like I didn't know this was an option. It's you can pull it up on the Fed's website. >> No, I believe you. No, that's the thing is you're you were a Fed insider at the Dallas Fed. Like that's >> you know it um >> the reason I had to write this >> is because in my lifetime at least I wasn't following monetary policy when Arthur Hayes was in office. I wasn't even alive. Um, [clears throat] we haven't needed this option in our lifetimes because we haven't had eight out of 12 district presidents vote against lowering the discount rate. We haven't had this level of dissent in my lifetime. >> Mhm. >> We have it now. >> And that's that's unusual then the descent. It is unusual to see this level of dissense and persistent. It is unusual to have such division on the Federal Open Market Committee. And in this particular case, I think that there's a justification for the members saying, you know what, we believe Christopher Waller is going to be the most balanced individual. He doesn't believe in quantitative easing. He doesn't believe in the zero bound. We think that those were policy failures. So, we're going to elect Christopher Waller. I'm just using a hypothetical. >> But I think now is the time for them to exercise their right to vote. This episode is brought to you by Van X Rare Earth and Strategic Metals ETF, ticker symbol REMX. Rare Earths are the hidden backbone of modern technology and defense, powering everything from smartphones and electric vehicles to fighter jets and wind turbines. Van Ec recognized this early, launching the rare earth and strategic metals ETF, ticker symbol REMX, 15 years ago, well before supply chain security became a global priority. Today, China dominates the production and refining capacity of rare earths, creating real challenges for global supply chain security as these materials are essential for technological innovation, clean energy, and national security. That's why countries all around the world are racing to build their own supply chains and reduce reliance on China. As this global shift continues, investment in the rare earth ecosystem is growing rapidly from mining to advanced manufacturing. Investors can gain access to this powerful trend through REMX. Visit vanck.com/remx Juliia to learn more. Okay. So, let's go back into a little bit of history, too. Like, in the letter, you also talk about Bernani back in 2007. You also talk about even what Pal was warning about back in 2012. >> 2012, he'd only been on the he'd only been a governor for four months. He was a baby. He was a rookie on the committee. And yet, he was adamantly, passionately against >> QE, >> passionately. Some say that I put that in there to remind the public what a hypocrite he is. Maybe. I think I quoted him because he was speaking the truth then. >> Mhm. >> But and I quote Bernanki. Well, I I referenced the Bernanki doctrine >> because a that was a violation of the Federal Reserve Act. You cannot make a decision of that magnitude without a quorum. And yet he was able to pull into a conference room in Jackson Hole, just a small codery of his closest confidants. And there at that meeting in August of 2007, the decision was made, should we be forced, I mean August 2007, my god, the world was ending. You know, a year later, Lehman failed and the Fed I mean I was there at the time. The Fed knew what was coming. And yet my boss at the time, Richard Fischer, wasn't in that room, but he was at Jackson Hole. Mhm. >> That violated the Federal Reserve Act >> that they didn't have everybody who had a vote on the Federal Open Market Committee present at the meeting in which it was decided the Bernani doctrine. If we're going to launch quantitative easing, if we're going to launch large-scale asset purchases, we must first have the Fed funds rate be at the zero bound. That was decided without a full quorum of Fed officials. >> Okay. And when if they're in violation, too, is there even a consequence to that? It wasn't it wasn't written necessarily. It wasn't published, >> right? >> Um but I can damn well guarantee you that Random Houses's attorneys made me fact check it six ways to again like I believe you. That's the thing is >> to get into fed up. It happened. The meeting occurred. >> Okay. And they're in violation of the Federal Reserve Act. Yet it's also like I hear other people will say this. They're violating the act. Is there ever a consequence to violating the Federal Reserve Act? >> Not as long as the rich get richer. Oh man. Okay. So, is this an opportunity then for there to be a reset for the Fed because you wrote fed up? Why the Federal Reserve is bad for America? I can't remember. Is that the full headline? >> It is. >> Okay. Is this a moment you think there's an opportunity? We can change the subtitle with the sequel. Fed up. Why the Federal Reserve was bad for America instead of is bad for America. We can make it into a was the Fed can exert its independence. The Fed should exert its independence. I mean Turkey has central bank chairs who are installed by Turkish presidents and that's why we call them third world countries. >> The Fed knows this. Members of the committee know this. They complain about it. As soon as you know, black FOMC blackout's over, they'll all be at some podium or at on some TV set blah blah blah with their opinion. >> We'll get the Fed speak. >> If you're so pissed off, do something about it. Vote. Vote on January the 28th. >> Mhm. Well, you and I will be together um for the FOMC in January so we can have hopefully an update um hopefully an update here to this. I >> hopefully I'm still here if the president hasn't put a hit out on me by [laughter] them writing today. >> I mean like maybe they'll >> I'm like, "Oh my god, there's a price on my head." >> No, not at all. Maybe they'll read your letter. You sent it to them, so maybe they'll read it and it's been everywhere today. I've seen a lot of folks talking about X. Um >> I guess question for you is if the market thinks we're going to have QE, which we're not, or you don't you don't think we will. Is it QE not QE? like just to use a different term. >> Well, it's an injection of liquidity into the system to ensure the financial plumbing continues to operate as need be because the Fed's worried that liquidity is dried up. >> So, >> and again, >> when it was not QE a few years ago and I was getting slaughtered on the social media platform formerly known as Twitter, it was not QE then. >> Yeah. >> But injecting liquidity by buying securities I'm sorry. >> Will they ever call it QE again or they just use something like injecting liquidity? Whatever. >> Oh, the Fed's not going to use that. No, they assured the markets today. It was in the verbiage. I've got the statement right there that this is solely >> solely to ensure that the financial plumbing continues to operate >> that there's ample liquidity in in a situation where the ample reserves have been run down. There's no more balance in the RRP. the reverse repo >> just to keep operational efficiency in the markets. >> Yeah, the markets and the markets like it. So >> Oh, the markets liked a lot. >> Yeah, but that's not representative of the hardworking Americans as you point out. >> It's not. It's rep It's representative of stocks are going to rip even higher because the Fed's going to inject liquidity into this so that speculators can continue to rape and pillillage average everyday working American. for him to stand at the podium today. For Powell to stand at the podium today and you know it took something for me to say it's time for a leadership change because that was pointed at Jay Powell when he gets up at the podium and says that he's making monetary policy for all Americans. Somebody needed to say and I said >> That was what it was about. He needs to stop lying. >> Yeah. What do you think his legacy will be >> right now? Not very good. Mhm. >> I mean, think about October of 2012 when he said, "You know what? It's going to be really hard to extricate ourselves from QE if we keep going down this path." Correct. Jay Powell, you are absolutely correct in October of 2012. And then you shepherded the largest expansion of the Fed's balance sheet in the history of mankind. >> Do you think his legacy will be worse than Arthur Burns? >> I don't know. Um, I mean, Arthur Burns let inflation run haywire. >> Jay Powell's ignoring layoffs and people suffering. >> I mean, I guess that's two sides of a coin, right? Suffering is suffering. >> What do you make of the trajectory of the economy? You in the in the in the letter, you also reference Mike Green. Mike Green was actually just in studio earlier today. >> Mike Green in the house. Okay. >> Yeah, Mike Green was in the house today. Um, first time meeting him in person, but we talked about his super viral piece. Mhm. >> on what the real poverty line is like in America and how middle class has just been >> crushed. It's basically $100,000. >> Yeah. $100,000. And if you live in Essex County, New Jersey, like close to 140. And I imagine here in the city even higher than that. >> My my running joke is if you're if you're in the city, you need to be a billionaire with a B because a millionaire is just not getting by. >> Okay. I said that earlier. I was a little like nervous and like this like okay when I was recording with him, I was like I feel weird saying like a million's not as much as like when I was a I was like, "Oh my gosh, million dollars. You're set for life." Not in New York City. >> Mm- >> No. Not Not when your rent's like 100,000 a month. No. >> That's crazy like saying I feel weird saying it, but I'm like, "Yeah, even I think he really hit a nerve though that 100,000 140. These aren't luxurious lives. It's like >> they are." And that's why I the one the sole graphic that I put into my manifesto was the increase in government transfer payments as a percentage of GDP. Fed policy is eviscerating the middle class that Mike Green rightly identifies as being today's impoverished. You think, okay, so the blame lies at the Fed then >> or well, they've enabled all this expansion of fiscal spending. >> They've had how many campaigns of lower for longer that's allowed the Fed to expand the social safety net to where you're in good shape if you're really poor because you're the recipient of all of these 81 programs >> that are out there if only if you're poor enough. you have the safety net and then it's like the working poor that like it's almost like what's the incentive to even get out of it if like you're going to struggle and have to pay more and all. >> That's exactly right. And what's the incentive for Congress to even pull back on that spending because it buys votes. >> And what does that say about the trajectory of where we're headed? Like what are the longer term consequences of this? >> Well, I don't know because we're telling people not to work. >> Yeah. But I also think it's got to have long-term consequences because one of the other things is you're not seeing people form as many families or have kids. I bet if you >> they're angry. They're angry. I mean, now everybody's like, "Let's go President Nuome >> because the pendulum >> swings back the other way." >> It probably doesn't fix the problem either. >> Yeah, >> it doesn't. All that does is expand social spending even more. And I mean, right now the solution is to move out of California. >> If you can't afford to pay all those taxes, >> people going to leave the country. >> They're going to go to tax. >> And you know what? By the way, Green's right. At a federal level, we're paying less as a share. >> Mhm. >> The wealthy. >> Mhm. >> Taxes do need to go up some. It's true. Um but certainly not on the working. He got He got a lot of criticism, too, like from Well, he got a lot of praise, too. I will say this. He got a lot of He got a lot of criticism from think tanks. >> Elitist. >> He did. He got a lot of he got a lot of criticism from thinks that benefit by all of the money that's spent on Capital Hill for them to dream up the next social program. >> Yeah. All of these like smart people who come on this show, they all were sharing the the piece like really smart people that I respect much more than I respect someone at a think tank um were saying like how they loved the piece. And then what I really liked was when the Washington Post wrote it up, they did a AI summarization of the thousands of comments and the sentiment was this is my reality. This is my life. I think he really hit the nail on the head. >> And you're someone who's been amazing at undercovering uncovering these kind of hidden narratives that are out there, >> especially on the labor side of things. >> Where do you where do we stand today? Like what is the update for >> I mean college graduates The unemployment rate for college graduates is pushing 10%. >> 10%. >> That's really scary for those who are graduating degrees. That makes me wonder, is that the highest it's ever been for >> No, but it has been higher in >> college degrees. So, where was >> it? Has been higher in severe severe recessions >> like I'm thinking financial crisis, but >> and we're not even in a crisis. That's what that's what scares me, Danielle, is we are not in a financial crisis situation or at least it's not acknowledged. I know you talked about we've only had 717 bankruptcies this year, the highest level in 15 years. But we don't talk about that either. >> What happens when we are in a crisis situation if it's already 10% now? >> Exactly what that portfolio manager said last night. Fed's balance sheet's going to 10 trillion. Print print maybe. >> And then they're just going to write >> the underlying cause. Even if there's a Doge dividend or whatever the hell you want to call giving 2,000 people, giving people $2,000 checks in in an election year next year. It's I mean, by Dollar General, >> not even though that would Yeah. >> Huh. Oh gosh, that's a it's a worrisome thought. And when I think about the young folks that you've talked about, the college grads, it almost feels like are the companies just not hiring at that at that level because your entry- level job, your internship, it's so important. Is that just their way of like not doing, you know, AI is coming to take jobs? Maybe one way rather than doing layoffs is reduce the number of people you're bringing in out of school. It's certainly what's happening. And I actually um one of my daughter's college essays, she just applied to a program um was about the effect of AI and what she wrote was was really telling. She said in the future, you're not going to be able to be an attorney. You're going to have to be a master litigator in the future. You're not going to be allowed to be AI is not going to allow you to be an accountant. You'll have to be a forensics specialist. In the future, AI is not going to allow you to just be a doctor. You're going to have to be an instinctive healer. and in the future she wants to go into finance. I'll have to think of the next generation of a stock or a bond because AI can replace plain old finance undergraduates too. And I'm like a I just got chills. Wow. This is my just turned 18 on Pearl Harbor Day Sunday. But she's right. Yeah. Like there it's expectation that everyone's going to have to be like an extreme expert. And that also makes me wonder too, and I think about when I first started my career, >> I was a journalist and it was like, well, really when I started it was pulling wires and transcribing other reporters interviews because there was no AI back then. But you did the grunt work and you learned along the way and you kind of grew. It's like almost like an apprenticeship in your career >> and it gives you a better appreciation for >> your art >> for being a member of the fourth estate. Yeah. >> But you mean to pose your own question, what does it mean that they're not going to go through those motions? >> Yeah, that is worrisome. >> And how how how much pressure does it introduce that they have to be the best of the best of the best to outthink the machines? >> And how do you do that if you don't get like the real world experience? Maybe our call to action is if you can hire a young undergraduate. >> Oh, >> please. I mean, I I I say it on every day. Every day people like, "When is this going to end? When are we going to stop seeing all-time highs in stocks and all-time highs in anger >> for working people?" And I'm like, when we figure out the the proposition, the math, the formula to pay people a living wage and not be greedy as corporations. And when we educate everybody from the ground up, >> what's your um biggest fear around how all this ends? Like how do you I I mean I take it this is a real risk. How do you [sighs] how do you think about how this ultimately plays out? What what makes you fearful or worried? And then let's do the other side of it and how could we get out of this? What would be the path forward? So >> you know, you've got all baby boomers in retirement by 2029. >> 2029, that's just around the corner. So going to the zero bound again, it ain't going to do what it once did and it's going to make a lot of retirees nervous. >> Explain that real quick. >> Well, they I mean they they've had 1.75 percentage points of what they were earning on their cash is now gone. >> Um so this zero bound is not going to work as well as it did because of the aging of America. Um, and at some point, at some point, the rest of the world could push back on the US Treasury being the risk-free asset. If we're like, if we're say, let's, you know, let's do QE and get the balance sheet from 6 to 10. Why not six to 20? I mean, you end up putting the risk-free status of the US Treasury at risk, which actually puts democracy at risk worldwide. That's the risk. >> What do you think is the way out then? >> I really that it's it's why I wrote the open letter. Um, somebody's got to be honest with the American people and say, "We have to get off this roller coaster. We have to stop the money printing. We have to stop making monetary policy just for the 10%." Maybe there'll be an ugly recession in between, but we have to get past the point where monetary policy is being made for a smaller and smaller and smaller percentage of Americans as a factor of time. If we don't, we're going to land in civil war. So I think step one is just the cleansing of sunlight, honesty, truth in monetary policym. If Congress wants to spend a bunch of money and say Fed, print it, the Fed should be able to say no, we're independent. We do not have to do your bidding and we're not going to. We've got to get there. >> Before I let you go, Danielle, parting thoughts. What would you like this audience to think about, take away from this conversation? If you haven't read it, and this is not self- serving. >> Oh, no. They should read it. We're going to link to it. >> If you haven't read it, read it. Call your congressman. Call your Congress woman. Call your senator. Remind them that you're their constituent and that you want for them to advocate for an independent fed. Call your senator and say if a pathy's nominated to replace Jay Powell, don't confirm him or her. I think we have to take control of the country back and it's going to start with taking control of the money back. >> Daniel D. Martino Booth, chief strategist and CEO of QI um research, author of the Daily Feather on Substack. I'm a subscriber. Go subscribe. And author of the book Fed Up: Why the Federal Reserve is Bad for America, friend of this show. We really appreciate you. We always love our conversations. It's been so wonderful spending all of the FOMC meetings with you this year and I look forward to seeing you in January. >> I do as well. And happy holidays, Julie. >> Happy holidays. Merry Christmas. >> Merry Christmas.