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Dallas Fed Has Requested A Rise In Discount Rate To 100 Bps, Fisher Joins Hoenig Asking For Drop Of "Extended/Exceptional" Language

Tyler Durden's picture





 

It appears the Fed meeting on the Discount Rate that was held last week behind closed doors is about to yield results. In a Q&A with reporters following a luncheon sponsored by the Levy Economics Institute, Dallas Fed's Richard Fisher said that "his Bank's board of directors recently requested an increase
in the primary credit rate. The request was made out of a
desire "to normalize" the spread. "We would like to get it back to 100"
basis points.
"According to Market News, Fisher "also told reporters he opposes the Federal Open Market
Committee's continual assertions that it expects the federal funds rate
to stay 'exceptionally low
... for an extended period.'"Furthermore, when discussing the steepness of the curve, Fisher hit the nail on the head: the curve is record steep due to a "limping" economic recovery (at record underemployment and an inventory restocking based GDP boost, we wait with baited breath to see just where this recovery is), but mostly due to record treasury supply. And because auctions have not busted yet, banks, whose PDs bid for these very auctions, especially on the short end, help to create a record steep curve, thus allowing them to borrow at zero costs and lend (assuming there is anyone out there who actually wants to borrow) at whatever rates they choose, thus guaranteeing themselves record profits for so long as the US continues to issue an average of $10 billion in debt a day! If you see this as a perverted Catch 22, you are not alone. The only one getting raped in all of this, has always been, and continues to be, the US middle class. At some point, the debasement to the dollar which all this printing results in, will catch up with consumers, but by then all the wealth in NPV terms will have long been transferred to the banks, their shareholders, and their managements.

More from Market News:

Earlier, in comparing the United States and debt-hobbled Greece, Fisher observed that the U.S. now has a "steepening of the yield curve."

"Part is due to the strengthening recovery," he said, though he called it "a limpid recovery."

But he said the yield curve is also steepening because "the price of (Treasury) debt is being affected" by federal deficit financing.

"Something has to be done," he said, adding, "the worst thing to be done would be for the Fed to monetize the debt."

"The fiscal authorities have to get their act together," Fisher went on. "Until they do the price will be affected." And he repeated that "the worst possible outcome would be for the Fed to accommodate" fiscal policy.

Turning to the issue of inflation, Fisher said wage pressures are the least of the economy's problems just now. "There is way too much slack in the system," he said, adding that there is "enormous excess capacity."Far from t borrowing.

As a result, he said, "we have some of the lowest inflation pressures we've seen in 33 years."

But Fisher cautioned that, as time goes on, the Fed will need to "be mindful" of the potential for the roughly $1 trillion of excess reserves to generate inflation pressures as and when they begin to flow into the economy in the form of expanded bank lending.

 


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Wed, 04/14/2010 - 17:28 | Link to Comment Thisson
Thisson's picture

Good - let them raise rates and hasten the apocalypse.

 

What hubris, to think they know the magic # to set rates equal to.  They will always be wrong - setting them either too low or too high.

Wed, 04/14/2010 - 17:29 | Link to Comment whatsinaname
whatsinaname's picture

yawn...

Wed, 04/14/2010 - 17:40 | Link to Comment buzzsaw99
buzzsaw99's picture

Limp dick Dallas joins forces with impotent Kansas City against the dark lords of the east. LMAO!!!

Wed, 04/14/2010 - 20:37 | Link to Comment zeroman
zeroman's picture

MIDWEST FED BOYS CANT BEAT WALL STREET FED BITCHES/WHORES FROM THE EAST.  DON'T EVER FORGET WHO RUNS THIS COUNTRY AND WHO IS YANKING OBAMA'S BALLS TO DO WHAT THEY SAY.  THE BIG VAMPIRE SQUID BANKS. YEAAAAAAAAH. BUY WARRANTS AND BE A MILLIONARE!!!

Wed, 04/14/2010 - 17:39 | Link to Comment plocequ1
plocequ1's picture

I'm one of the middle class. Please Obama, Raise my taxes already. The anxiety is fucking killing me. I demand an extra 50.00 be taken out of my paycheck. As long as the banks get rich, you can take all my money. Just don't take away my Netflix and ipad. Thank you

Wed, 04/14/2010 - 17:40 | Link to Comment baserunr
baserunr's picture

And yet I saw him yesterday on Fox Business, where he said he saw no chance for a double dip in the recession (isn't it over already!) and he  explained to the host that the currency we have is "faith based".  Hard to tell which comments are actually "heart-felt", and which are just public posturing.  I am assuming there is a difference, but I may be wrong!

Wed, 04/14/2010 - 17:44 | Link to Comment BlackBeard
BlackBeard's picture

yeah, they just don't want to bleed the cashcow (you) to death all at once.  Slow drip is the preferred protocol.

Wed, 04/14/2010 - 17:51 | Link to Comment sysin3
sysin3's picture

Why don't they just tie the rates to (pick some arbitrary numbers, X%) of the 3-month bill ?

Adjust it monthly and be the hell done with it.

Oh wait, then those Fed boyz would be unemployed.  Never mind.

Wed, 04/14/2010 - 20:39 | Link to Comment zeroman
zeroman's picture

TO SET TARGET RATES;; GET A DART BOARD AND HOENIG AND BERNANKE CAN GO MANNO Y MANNO. YEA.  THIS IS PROBABLY AS REALISTIC AS THEY DO IT NOW.

Wed, 04/14/2010 - 17:53 | Link to Comment mynhair
Wed, 04/14/2010 - 18:00 | Link to Comment Instant Karma
Instant Karma's picture

Yep. Fisher said this on Cavuto last night, except, nothing about Fed policy (raising the discount rate, changing language).

If the Fed re-asserts its independence, and borrowing costs for the Treasury go up, then interest payments to service the debt go up, then the political branch of the Government has to raise taxes and slash spending (something Fisher said he would like to see).

This will slow "growth." Hard to see an easy exit stategy here.

Personally, I'd take inflation, as I'm positioned reasonably well for that.

Wed, 04/14/2010 - 18:03 | Link to Comment john_connor
Wed, 04/14/2010 - 20:42 | Link to Comment zeroman
zeroman's picture

DUDE; RELAX. YOUR GONNA HAVE A STOKE.  IF IT LOOKS,SOUNDS, AND ACTS LIKE A DUCK, THEN ITS A DUCK.  WE ARE GETTING SCREWED BY THE ELITIST'S AND THERE IS NOTHING WE CAN LEGALLY DO ABOUT IT. RELAX AND ENJOY THE PROCTOL EXAM!

Wed, 04/14/2010 - 18:14 | Link to Comment ThreeTrees
ThreeTrees's picture

Fisher said wage pressures are the least of the economy's problems just now. "There is way too much slack in the system," he said, adding that there is "enormous excess capacity."

Goddammit I wish these pencilheads would pull their respective writing implements out of their asses.  10 billion a day in new issuance coinciding with massive infrastructure projects funded with government money, a jumped up PPI in capital equipment and exploding PPI in Energy Goods, and a stagnant CPI because the financial sector is still bleeding productive enterprise dry... They seriously don't see any inflation?

Fuck your economic models Dr. E. Conometrician.

 

 

For convenience's sake:

Finished Energy Goods: http://research.stlouisfed.org/fred2/data/PPIFEG_Max_630_378.png

Industrial Commodities: http://research.stlouisfed.org/fred2/data/PPIIDC_Max_630_378.png

Capital Equipment: http://research.stlouisfed.org/fred2/data/PPICPE_Max_630_378.png

 

 

 

 

 

 

 

 

 

 

 

Wed, 04/14/2010 - 18:35 | Link to Comment JR
JR's picture

The only one getting raped in all of this, has always been, and continues to be, the US middle class…

That premise, IMO, is verified by this Q&A in an April 2010 credit union financial newsletter. A specialist in retirement planning writes: “I hear this type of question a lot these days”:

Q: I am 55 years old and I have a 401(k) with my employer.  It was worth about $200,000 before the market meltdown and is down to about half of that now.  I also have around $50,000 in a taxable account.  I realize that I may have to work longer than I anticipated to retire, so how can I make sure that I am maximizing the return on money I have left?

In her answer, she suggests investing his remaining retirement funds based on three factors: time left until retirement, the amount of income needed in retirement, and lastly:

“Risk tolerance (and keep in mind, every investment has risk – even a fixed-rate product like a CD – since the rate may not keep pace with inflation).”

That is the true picture, IMO, of the plight of the vast majority of America’s middle class trying to cope in today’s banker-planned economy. It exposes, IMO, not only the reality of price inflation but how eventually the wealth in NPV terms will have long been transferred to the banks, their shareholders, and their managements—regardless the Fed’s BLS.

Wed, 04/14/2010 - 23:58 | Link to Comment QQQBall
QQQBall's picture

Yes and the trick is to maintain purchasing power while not drawing down the $200,000 + $50,000 and end up with a blue smock and a yesllow happy face greeting arriving shoppers when you are 77 yo .

 

The real answer to the above was to first figure out how to make sure you get your money back before making the most on it....  trying to make the most of it might be a big mistake

Wed, 04/14/2010 - 19:57 | Link to Comment Gold...Bitches
Gold...Bitches's picture

At some point, the debasement to the dollar which all this printing results in, will catch up with consumers, but by then all the wealth in NPV terms will have long been transferred to the banks, their shareholders, and their managements.

Not me.  They cant debase my physical gold.

Wed, 04/14/2010 - 20:15 | Link to Comment Buck Johnson
Buck Johnson's picture

They can't raise the rates because that will increase the costs of servicing the debt of many banks and institutions.  Also it would stymie housing and the economy.  What is being hidden from the american people is that we are in stagflation and trying to get out of that is almost impossible.

Wed, 04/14/2010 - 20:16 | Link to Comment Fritz
Fritz's picture

"Lowest inflation pressures in 33 years"

Once again, these fuckwads either don't know or don't care that the average american is getting blistered with inflation right now.

Stagnant wages with rising food and energy costs (not to mention college tuitions gone parabolic) are gutting families.

It is evident that they believe enriching wall street banks will somehow make everything OK.

 

Wed, 04/14/2010 - 23:29 | Link to Comment Mitchman
Mitchman's picture

I don't think they care one bit about the suffering they are causing or will cause in the future.  They have no accountability.  

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