I
will make the case that recent developments in commodity prices can be
explained largely by rising global demand and disruptions to global
supply rather than by Federal Reserve policy.
This is an insane position for Ms. Yellen to take. There at least a
dozen separate public statements by Bernanke that the goal of QE is to
raise asset prices. Are commodities not assets? They are. And Yellen knows it.
When the Fed has ZIRP, cash seeks out higher risk investments to retain
some return. Again, Bernanke and all the other Fed governors have used
this line in defense of QE. Ben’s words from just six weeks ago in his “QE is working” speech to the National Press Club:
“Since August, when we announced our policy of reinvesting maturing securities and signaled we were considering more purchases, equity prices have risen significantly.”
Does Ms. Yellen think Americans are stupid? That we don’t understand that monetary policy is a major driver in the economy? That cheap money does create bubbles in things like commodities and equities alike?
If Ms. Yellen is in doubt of that she should sit down with someone who
understands the connection full well. I think she should have a tea with
former Fed head Paul Volker. He would tell her the same as me. What she is trying to sell is just drivel.
With that off my chest let’s focus on the Fed’s credibility. I want them
to be more precise with their definitions of inflation. The Fed is
looking at Personal Consumption Expenditures as their definition of a
benchmark for inflation. I maintain that this is a bad matrix as it is backward looking.
Inflation is clearly rising. The Fed can’t just look into the rear-view
mirror to measure what is going on. They have to be pragmatic and look
to the future of inflation as well. There is one measure of future
inflationary expectations that is worth noting. The spread between 10-year TIPS and coupons is on the wide. Here’s the graph:
The Fed folks aren’t stupid and they know that inflation expectations drive reality. Yellen said so today:
Critically, so long as longer-run inflation expectations remain stable,
the increases seen thus far in commodity prices and headline consumer
inflation are not likely to…..warrant any substantial shift in the
stance of monetary policy.
Okay. We have her on her word. It is critical that inflationary expectations don’t get out of hand.
So here is my challenge to Ms. Yellen. Give us some firm guidance on
expectations of inflation. Use the 10-year TIPS/Coupon spread. When do
you get concerned? What ranges do you want? The Chairman has given us
firm targets on core (“ a little below 2%”). Give us reasonable ranges
on what inflationary expectations the Fed is shooting for.
Ms. Yellen teed this up today. She was the one that said that it was critical to contain expectations.
There has been a lot of talk about the Fed communicating its intentions
better. This would be a good opportunity. I will send this off to her. I
doubt I/we will hear a word. This Fed does not want to look forward.
They’re making a mistake. They should all ask Volker his thoughts on
this as well.
Note:
In the current environment where we have massive monetary stimulus I think that a 3% spread is coming. At that point the water is already boiling. If the Fed fails to react when markets are ringing alarm bells; they will have made their next historical mistake.
Think they are simply trying to avoid an oil spike happening before the next FOMC meeting so the decision of not cutting QE2 short wont meet too much resistance - clearly the PR department of the vampire squid is helping out the best it can.
seems appropriate for all the news we get today:best line from an American film:" Mr Gates somebody has to go to Jail."
My challenge to Yellen is to see if she can fit a garbage can up her cunt,because thats where a useless cunt belongs.
You know I'm trying to get Yellen to respond to this. This kind of talk is not helpful to that end. Lighten up. Please.
"I have no recollection of that event..."
"I did not have sex with that Woman..."
I love the smell of freshly scratched balls in the morning.
Maybe there should be a ZH yearly rating for the worst criminals. 1 to 10. That would leave out a bunch but there could always be sub-sets.
She isn't a dove, she's a turkey vulture feasting on the carcass of America.
I would love to have a yellin LAMPSHADE on my nightstand to illuminate my reading. And a CANDLE to burn when the power goes out.
Yella boy on the drum gettin' dumb. Programmin'
She is so far up BB's ass she can see Timmy's shoes.
She is not an idiot,she is a Communist pretending to be an idiot,
Read this and weep,
http://www.rasmussenreports.com/public_content/politics/obama_administration/daily_presidential_tracking_poll
The bottom line is this : Without Fed bailouts, Tarp, rule changes etc. Interest rates would be much higher than they are today. Higher rates would most likely mean a stronger dollar. The Fed and the government have effectively picked the pockets of savers. The weakness in the dollar has created a bubble in risk assets. Commodities are risk assets. The bubble will deflate when the Fed withdraws support. Their hope is that the economy will pickup to offset their withdrawal. Yellen is a liar. She's not being truthful. Artificially low rates have resulted in higher commodity prices which create inflation.....regardless of the what the CPI says.
Bruce, you missed the most important comment about Ms. Yellen: where was she when NINJA, Liar Loans, and Option ARM were all the rage in her home state? Given her complete failure in any regulatory, sound-banking, protecting-savers'-deposits perspective during 2003-2007, why should we listen to a damn word she says now? Clearly, she's nothing but a 'tool'.
Exactly, this is why people need to be held accountable and put in jail. I can not imagine a more obvious situation than "liar loans", "0% down, "House equity as ATM"....in the 2002-2007 period for a financial regulator to protect society and all financial regulatory authorities, INCLUDING THE FED, did absolutely nothing. Hell, Angelo Mozilo is still free...nuff said!
It's pretty simple. Over the past few weeks, all the governors have gone on-message because they're scared of high commodity prices. They can't raise rates, they can't drain liquidity; hell, the last couple of days, it looks like they can't even end QE.
They're catching a lot of heat for it. They deserve it - they looked like fools from 2007 - 2008. QE has been going on for two years now, home prices are still falling and barely any jobs have been created. Guys like Dudley get out in front of the public and look like elitist idiots.
No matter how insulated they are from the public, they have to know that this is a miserable and angry country. They aren't elected, but the people who appoint them are, and if this shit doesn't turn around quickly - think, a year at most - the guys who ARE elected are going to do a clean sweep.
These kinds of speeches are their versions of papal infallibility. It looks silly in the face of reality.
She needs some hard anal and bitch slapping
Business before pleasure, good sir.
"Yellen is a dove".
"Yellen is a dope". There, fixed it for ya, Bruce. Although I prefer skeezer.
yep
Here is link to federal reserve contact form...
http://www.federalreserve.gov/feedback.cfm
I am going to paste Krasten's article with my introduction.... "Stop your drivel, I AM NOT STUPID!"
I urge other zerohedgers to do the same.
I had to delete less than 10% of article to meet the 3000 limit. The more that holler the better. We might make a new movie...
see, Fed Board members thanked me...yea right..(Note: When you identify country, the United States is in alphabetic order. The Fed is a f%$#@!* American institution. USA should be at top and other countries eliminated. Someone from Libya as same access as I do, why? Maybe the Fed actually works for the UN?
Your feedback has been sent regarding: Board Members
Thank you for your time and comments.
50 percent drop in manufactured goods. They are going to make up the difference in price and inflation. Or they die. It's just that simple. All corporations are debt laden and saddled for some percentage of growth and doubling over some time frame. That's over. So the underlying unit of trade metric has to step in and turn massive shrinkage into growth.
They can't even hit their growth targets using this method. All the states tax revenues missed and missed big. Which is why april and may will turn into panic months. They've got to throw 10 to 15 percent more inflation on top of the fire and people will expect it no matter what is said or done.
I'm going to come right out and make the case for the fed being involved in UCC level 1 agreements between corrupt organizations in other countries.
Case one. The fed claims global reserve currency status allows you run huge trade imbalances between countries for some time. This is not true. Just as oil is traded on a real and mythical term. IE dollars plus gold. Euro's plus gold. All trade also contains a real component and a mythical component.
Take for instance intel. They claim to break sales records and sell 11.2 billion dollars worth of chips in one quarter. During a time when consumers have entrenched and the actual economy is down 50 percent. To claim to break sales records is miraculous. The miracle is being so stupid and arrogant that you aren't going to get caught.
Take Apple. They claim to sell 43 million iphones in 2010. Thier absolute and by far largest serivce profider at&t publicly discloses hooking up roughly 15 million iphones. This leaves orange france telecom to make up 28 million user deficit. They can't do it because they recently merged with another company giving them a mere 28 million user base period many of which are t-mobile and you can't get an iphone through them to save your life.
Take published reports of chinese companies talking crap about 40 million netbook sales a year to reach 100 plus million sales a year in the projected future. This is nonsense to believe that this kind of demand for any product but food exists.
Take the scandal at foxconn where workers burn down an assembly plant in mexico and commit suicide in china. They are homeless people and migrant workers with very lose ties to any "place". Foxconn claims to employ nearly a million people. But who can really check. If they aren't as unethical and giant slimeballs then why do the business they do business with end up with fake ipads for sale at best buy and why do you get these scandals of faked equipment showing up. Because when you do business with lying number making up, rule breaking, abusive, lying companies they aren't at all averse to churning out a few thousand more plastic cases and selling it to the local counterfeiter operation in thier employees spare time during thier 16 hour work day.
The fed is a criminal organization with historical context of breaking laws rules and negotiations. How can they survive in a UCC international settlements environment when their word and thier contracts mean nothing. Easy they do business international criminal enterprises. It's easy once you see how they do the transactions. It's their favorite method of operation. The bullshit debt for equity swap. And the globalization is the most intriquing part of it. Because when you are staring at a legitimate european or american enterprise it's bullshit is all hidden in fucking china and taiwan or india. When you are staring at a legitimate chinese company it's bullshit is all hidden in america and europe.
The fed is so full of shit and the goverment is so full of shit. It collects social security from kids who work at mcdonalds who aren't old enough to enter into a legally binding contract. There's rules but they don't follow them and it's easy to see them being broken right left and center but people don't even say one thing. Why don't people say hey. GODDAMIT you can't collect fucking social security from a goddamn 16 year old you stupid piece of fucking shit.
And when this honor among thieves debt for equity bullcrap breaks down and the real teeth that UCC law has behind comes in the form of all out war between countires. Don't run to fucking canada to escape the war. Stand your ground and shoot the sons of bitches who think they force you to fight for their rights to screw over people 8000 miles away. And when the montanta sedition project gets started again. Start welding jail buster pipes all over your truck. And when the calls to war start. Set up long obnoxious full fucking disclosure bitches question and answer sessions.
The CB's heads need to depart their bodies.
Bruce, you're not gonna believe this, but I had a conversation with someone I thought understood our situation. He thinks commodities are rising because of "speculators". Clearly, J6P doesn't get the Balance Sheet Expansion thing.
Now, to some degree, my friend is correct -- even the Fed is speculating in the markets. Apparently, Don Henley was right: "You don't really wanna know just how far its gone." And they don't.
So, it doesn't totally surprise me that they think they can waltz out on the national stage with a message that would elicit laughter from a Chinese classroom.
Peace
Yellen makes me sick. Imagine how much of a complete disgusting lying human being you have to be to maintain this excuse for further QE by saying there is no infation. Even worse she is thought to be next in line to take over for Bernanke. The US has no choice but to end the Fed and end it now before any further damage can be done by these Keynsian fools.
Between this and Christina Romers (Female Shrek) interview last week, it is clear that having a PHD in economics means nothing and applying academia to the real world only shows that the disaster that is coming will be bigger than we think, because these folks in the decision making seats are even more stupid than we realized!
Amen. Why don't women stay at being women. A dove should be a turtle dove...
I think Yellen is yelling I'm a woman and both ways are my ways...I said it like I felt it. And took it like I shook it. A commodity is not as asset like a paper stock, avatar of living organism, a Wall street corporate hot rod. Its more a piece of action in the form of exchangeable distraction like a vibratory object that changes hands amongst people of the same mind set and often same sorority. Don't let it upset your downside if it yells "hummer" to commodity and "honey" to hard WS asset. Momentum trade is exciting when the motion really gets from "mom" to "tum". That's the bottom line. It kills her every time. Rum tum tum.
I like it when The Bruce fires up on The Bernank's ugly step-sister with facts...
Bruce: you are now on the terrorist list as, I suspect are the rest of us.
I have to disagree, not that I am taking Yellen's side. There is a diff between a momentum trade as in commodities and the 'yield trade' in risk assets such as with equities, particularly those issues sporting some sort of 'divident yielt'.
Petroleum has a supply problem and the rise in price reflects the narrowness between what the world wants and what the world perceives can be made available at any given time. What is for sale on the crude market right now is perception, that there is 'plenty' even when the price itself indicates there isn't!
We are all stuck in the energy wormhole, conundrums such as the above are part of the decor!
Since petroleum is at the bottom of the price structure for the other commodities -- gold mst be mined, corn must be machine- harvested, pork bellies must be shipped in tractor trailers -- demand for crude equals demand for the 'other stuff'. Crude is embedded in everything so that as crude prices rise, so do the prices for other energy- sensitive goods such as credit!
If you don't think credit is expensive, ask energy dead- beats Greece and Ireland. Neither country has one oil well, the rest of the PIIGS don't produce oil, either so they must borrow and borrow again or stop driving. The high price of crude is driven by credit which in turn forces the cost of more credit/borrowing higher.
This is how the US is like Greece, by the way. It's also why there will be no economic 'recovery' without stringent energy conservation. You know ... get rid of all the gaddamned carz, hamburgers, industrial ag, automotive- style 'defense' etc.
If what you are saying is that peak oil is a 'theory' and that the oil price rise is more money market shenanigans, howcum the same MM shenanegans aren't lifting house prices?
BTW, I think John Hussman does a good job of describing how adding 'funds -- currency OR credit -- in a ZIRP environment tends to force yields toward parity with risk- free assets such as cash.
Remember two things: one is that the Fed's witch doctoring and willing finance dudes who play along are the only thing between everyone and Great Depression 2.0. The other thing to remember is the problem is the developed world and its wannabes living beyond their energy means. The crisis is parked at the end of your driveway and you have a choice: to earn money or drive.
For some reason this is a tough choice for peeps ...
Disagree with pretty much everything you say:
1) Oil has been trading inversely with the US dollar. The Fed has been trashing the US dollar.
2) And why the tunnel focus on oil? Food, cotton, metals, you name it all around highs.
3) House prices have a negative cost of carry called property taxes and upkeep while mortgage rates are rising fast. Plus the inventory is to poop on and the lower-middle class won't be fooled again, yet.
4) The Fed has only postponed a sharp recession for the coming depression. Bank shareholders and bondholders should have taken major pain post-crisis. Unfortunately the private Fed is controlled by said banks.
5) Energy conservation would be nice but so would drilling the crap out of Alaska. Perhaps our politicians care more about the oil interests than the citizenry? Is that possible?!
At some point, the cost of oil will impact the ability of China to ship their wares to WalMart cheaper than can be produced in South/Latin America / Mexico.
Whatever the cause, the price of oil will eventually make globalism too expensive to continue.
Let's hope. Gobalization is just a neat term to describe the lowering of the average American's standard of living. But it works out great for bankers!
Yup
If you are looking for Yellen's address it is straight up Ben's ass.
Is it not the central bankers primary duty to lie to the public? How better to engage in the wealth transfer? Let us not pretend that the Fed is anything more then a a wealth transference mechanism. So they must lie to the marks.
I wish you could get this post picked up Bloomberg or Reuters and distributed in mass media; get the chickens all clucking at once.
Hi Bruce-- amateur hour question of the day. What are the limits of a bank borrowing from the Fed ? For example, if the KowalskiBank were to see some severe losses in the Greek Bond markets next week, can KowalskiBank simply borrow enough from the Fed at 0.25% to cover the loss ? As banks go under on a weekly basis, there must be some sort of limit. Do the banks borrow cash from the Fed or is it some sort of bond purchase thingy ? Thanks
"Kowalski" you say? I knew a Kowalski once. He was fond of Ouzo and olives--would carry on and an about "The Resistance days" and we'd talk of "yachts in the Med" and "oil tankers." You do know the Onassis' of course. No? May I interest in one of our "free checking accounts" then?
Yes. I don't know if they think people are stupid; I suppose they know that most of their audience doesn't understand the subject extremely well, and they're going to get a lot of credit for being "experts in responsible positions", and in general, maybe this spin exercise will help a little. Good on you for digging up the Tips chart. They're beginning to sound like messages from a closed bunker; what happened to reality?
no, they only think "you're stupid" and proceed accordingly. a politician would never call "all of us stupid." THAT would be...stupid.
Ms Yellen is wrong therefore she is right. The Party is always right. War is peace, peace is war- it is that simple.
yes, of course she does. If Ameerikans were not stupid, Yellenstein and shtadlan Binyamin Shalom Bernookystein would never get away with their shenanigans. And get away they will..
...and we would have gotten away with it, if it wasn't for those meddling kids on ZH! I was going to take umbrage at your swipe at the squid, but three of them in a row for the head of the Fed would be just too sinister and obvious.
it's 'Mericans for one and "Janet is Yellin'" for two. I'm trying to figure out if you're comparing the Bernank to Benjamin NetandYahoo. I think you're all good on the shenanigans.
The bonuses and pay on Wall Street are so high because it buys their silence. The only crime that is unthinkable is to tell an uncaring public the truth.
"Does Ms. Yellen think Americans are stupid?"
Yes. And she is correct.