Tuesday. His words echoed those of Fed Governor Kevin Warsh who
recently wrote an important Op-Ed in the WSJ. On the issue of
withdrawing the monetary stimulus that is now in the system Fisher
said:
"I have faith my colleagues on the Federal Open Market Committee will stand and deliver (monetary tightening) in a timely way."
Mr.
Fisher and his colleagues recently voted to extend the Fed’s zero
interest rate policy, “for the foreseeable future”. In his speech Mr.
Fisher affirmed that the balance of the $1.25 trillion of Agency POMO
intervention will continue through the end of March, 2010: As of 9/23 the Fed had purchased $700 b of MBS, they have another $550 billion to go.
(“T)he FOMC expects we will complete the execution of our $1.25 trillion intervention in the mortgage-backed securities market by the end of the first quarter of next year.” (Finally the word intervention, thanks Mr. Fisher)
Of interest to me was that Mr. Fisher had strong words to say regarding the Feds future tightening efforts:
“I
expect that when it comes time to tightening monetary policy, my
colleagues and I will move with an alacrity that, if needed, will be
equal in speed and intensity to that with which we pursued monetary accommodation.”
Really?
Mr. Fisher has said he would ‘stand and deliver’ a reversal of monetary
easing at a torrid pace. When the time is right. If it is needed. But
not at anytime in the foreseeable future. If ever.
At this point
I would assume that the term “foreseeable future” means “not until
after January”. That dovetails with March as being the target for the
ending of the Agency MBS POMO intervention. So ‘foreseeable future’
could be as far away as six months.
For me the idea that we are
going to continue stepping on the gas for anther half year is scary. By
that time there will bubbles all over the place. If you take Mr. Fisher
at his word you would think that on April 1st the Funds rate would go
to something crazy like 3%. Some April Fool joke that would be. That is
not going to happen. This is a very big ship. It has go into neutral
for some period before the engines can be reversed.
A more
reasonable interpretation would be: Sometime after the first quarter
2010 the Fed will raise rates two times. The first will be in May, an
increase of 1.5%. Later in the year it will be raised another big notch
to 3%. The average for the full year will be less than 2%. There is no
meaningful tightening in that scenario.
The tough talk by the
Fed members is coordinated. Other Fed Governors have speaking
engagements this week. Bernanke is talking as well. Look for all of
them to pound the table on this issue. They know that the dollar has
been getting dangerously weak of late. They know that the general
distrust of the QE process is a part of that. It is no coincidence that
the ‘market talk’ on the dollar has been more constructive over the
past few days. Behind that recent thinking is the belief the Fed will,
‘do the right thing’.
However, if in three months the Fed is
still buying $20b of long duration coupons each week and the bill rate
is still at 9bp all this tough ‘Fed speak’ will be forgotten. It would
be better for the Fed to act tough versus talk tough. They have a lousy
reputation for backing talk with action.
Consider this from the
other side. Say Mr. Fisher and his colleagues do deliver on their
words. Assume the Fed funds rate is 4% by 12/31/10. This creates a
monster headache for Mr. Geithner. In a year from now the debt level
will be +/-$13 Trillion. About 30% or $4t is short term. This scenario
would increase the cost of just the short-term debt by $150b.
I
don’t see that either of these possibilities adds up to a strong dollar
medium term. In my view it is nearly certain that the Fed will go too
far with the QE process. The fact that they want to continue for
another six months at this juncture is proof enough for me. It will be
interesting to watch the cat and mouse game evolve. At some point over
the next three months words alone are not going to be sufficient.
FED is all talk no action - the only way out of this mess is stealth devaluation and asset price appreciation - we no longer save so screw the savers just keep speculators asset prices high in nominal terms.
Welcome to the new america where asset price support is the new national motto
Good cop fails, Bad cop says..... "You better go borrow cheap money now or it may not be there in the spring." A flat out play to get people borrowing money. About 18 months ahead of the actual need to make that statement.
Federal Reserve Buys More Than 100% of Mortgages Issued in 2009
http://www.chrismartenson.com/blog/federal-reserve-buys-more-100-mortgag...
my question is: what happens when those mortgages default?
who owns the land?
could the FED end up as the largest real-estate owner in America?
just swirl this thought in your head:
Alan Greenspan Plaza
I believe that the federal government is already the largest landholder in America. Has been since the founding.
On the same line of thinking how about, The King Of Collapse Mall, where plywood windows will be sheiky.
They are going to dump the dollar.
Remember - they are liars. It's been the plan all along.
Inflation would be indicative of a Federal Reserve (pyrrhic) victory over asset valuation reality. Such realities can be staved off with a metaphorical array of Heidelberg presses for as great a period as the bond market participants permit. It is unfortunate for the broader citizenry, however, that they will be trapped in a taxation and fee apparatus designed to uphold defective assets (e.g., Level 3) and horrendous management structures. (Are these men the products of some horrible dysgenics program? Such absence of foresight and principles would seem to suggest so.) Let's hope, for the sake of the Republic, that this 'tap the taxpayer' school of risk management is flushed from the nation's corridors.
http://www.cnbc.com/id/15840232?video=1275511738&play=1
Interesting essay and link.
Dallas Fed Gov Fisher famous for pre-panic Storms on the Horizon Speech 28 May 2008 at San Francisco Commonwealth Club adding up $99 T in unfunded mandates like Medicare, Social Security, Prescription Drugs and other alphabet agencies like FDIC, FNM, FRE, OPIC, PBGC.
Kevin Warsh relatively new to the Fed just rattled interest rate sabers to support the dollar for the G-20 meeting. The $300 B IMF SDR made of 60% dollar and the rest currencies inflating faster than the dollar, no panacea or solution to imploding financial reality.
Both Fed mouthpieces losing street cred, as informed money realizes with unemployment increasing until at least 2014, and virtually no shadow bank credit available from broken banks and corps, interest rates unlikely to rise at all until at least 2012, making 0 reelection unlikely.
Look for a military solution?
As Project Mayhem pointed out, the biggest budget buster deficit builder dollar breaker is 1000 US military installations around the world with simultaneous overt or covert wars in Afghanistan, Colombia, Iran, Iraq, Mexico and Pakistan that did not stop drugs, 9-11 or keep oil prices from $149.
While Jim Richards shows more market intelligence than most, we think he may be wrong about a dollar cut in half from here with gold going to $1500, for the simple fact the economy is deflating faster than the Fed and Treasury can inflate.
It seems even defaulting IOUs suck the life left out of the economy, a fact most post Great Depression bankers and economists may fail to grok to their demise.
Hard to fool or pad mother nature indefinitely...
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3251493
The video you are trying to access is unfortunately unavailable at the moment. 1025am
Conspiracy?
That's a great clip. However, sustained 4% inflation with very little economic growth may save the banks, but will cut deeply into J6P's already trashed 401k, ravage pensions and erode purchasing power as commodities become relatively more expensive. Politically, I just can't see that happening.
that's an awesome find, thanks.
good find.