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The Fed Speaks: September FOMC Report
From The Daily Capitalist
If you had asked me when I was a lowly college student if I ever thought that some day I would be reading a crystal ball for a living I would have switched majors to art or engineering. Yet here I am forced to read between the lines of the minutes of the Fed Open Market Committee's meeting today which is a bit like gazing into a crystal ball.
Here is today's big news from the Fed (with my emphasis added). Notice the murky language:
Information received since the Federal Open Market Committee met in August indicates that the pace of recovery in output and employment has slowed in recent months. Household spending is increasing gradually [but not recently], but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, though less rapidly than earlier in the year, while investment in nonresidential structures continues to be weak. Employers remain reluctant to add to payrolls. Housing starts are at a depressed level. Bank lending has continued to contract, but at a reduced rate in recent months. The Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, although the pace of economic recovery is likely to be modest in the near term.
Measures of underlying inflation are currently at levels somewhat below those the Committee judges most consistent, over the longer run, with its mandate to promote maximum employment and price stability. With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to remain subdued for some time before rising to levels the Committee considers consistent with its mandate.
The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period. The Committee also will maintain its existing policy of reinvesting principal payments from its securities holdings.
The Committee will continue to monitor the economic outlook and financial developments and is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate.
Yikes, where is the good news? There isn't any, as I pointed out yesterday ("Money Credit and Recovery"). Talking about a glass half full; they sound like me.
The only thing new today from the Fed is that they still don't know what to do. They are waiting for things to get better, quickly. If not, they will roll out the quantitative easing (QE) and start monetizing more federal debt. I have written about this extensively (here, here, here, here, and here). My guess is that they will react strongly to falling economic indicators, especially a rise in unemployment, and they will engage in substantial QE. The result will be stagflation. One thing to note is in yesterday's article I pointed out that money supply (TMS1-2) is starting to grow. This indicates inflation.
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The Euro fell and Germany (aka the European Economy) had strong growth. BB is saying, "Hey its our turn".
Just don't think Chryslers will sell as well as BMWs in China.
Increase in the money supply is monetary inflation. The FED statement per inflation, to me, was targeted at price CPI inflation. The assumption is that the two should track, to a certain extent. This is a historical model that the FED is using that no longer applies. Price is now manipulated and growth a function of debt.
Interesting line from the FED statement:
"Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit."
Notice, the wording "hosehold debt" or "high tax exposure" did not make it into this sentence.
Growth is constrained by debt, in a de-leveraging predominatly real estate price deflation environment. Productive capacity trends down in a consumer economy without effective trade policies. It seems that the traditional FED checks and balances, formulated over the decades, no longer apply to the US in an environment of massive debt driven malinvestment.
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The real problem with the FED releases, is they really do not provide any data to correlated the remarks. Why not reference the latest flow of funds or some other data source as per economic trends. Not one chart, not one analysis, nothing but economic babble. Also it seems that certain words are taboo. As if by not using the word deflation it may go away.
Also it seems that if the FED mandate wording is not included some place politicians may forget what the FED does.
So the realease is interesting for what it does not say and pathetic in its presentation.
Mark Beck
If things are so great why don't they tighten up -- just a quarter?
Because things are not great. Everyone knows it.
I look for more moves in the direction of control of social unrest.
What is of particular interest is that the most important aspect of a sound , advancing economy cannot take place without a sound currency....
No sound currency...no sound, advancing economy...
The Princeton Harvard Yale Club have obviously not been made aware of this....along with the IMF....unless of course THEY are playing the New World Order "herd the cattle" game....WHICH WILL FAIL....
Put it this way...not many months ago...the IMF was becoming irrelevent....Now...all of a sudden...the IMF is just the opposite....
One wonders why.....
The Federal Reserve will devalue the dollar to zero. And i quote:
"Given the very high level of reserve balances currently in the banking system, the Federal Reserve has ample time to consider the best long-run framework for policy implementation. The Federal Reserve believes it is possible that, ultimately, its operating framework will allow the elimination of minimum reserve requirements, which impose costs and distortions on the banking system" -- Federal Reserve February 10, 2010
www.federalreserve.gov/newsevents/testimony/bernanke20100210a.htm#fn9
Zero reserves = zero value.