This page has been archived and commenting is disabled.

January FOMC Minutes

Tyler Durden's picture




 

Key Highlights:

  • 2011 GDP increases from 3.0-3.6% to 3.4% -3.9%
  • 2011 Unemployment rate declines from 8.9-9.1% to 8.8-9.0%
  • 2011 PCE Inflation increases 1.1-1.7% to 1.3-1.7%

On labor: "Overall, meeting participants continued to express disappointment in both the pace and the unevenness of the improvements in labor markets and noted that they would monitor labor market developments closely."

On the stock market as the economy: "Conditions in financial markets improved somewhat further over the intermeeting period. Broad equity prices rose, adding to their substantial gains since the middle of 2010."

On the wrong interpretation of the steep yield curve: "Some participants noted that a steep yield curve is a typical feature of an economy in recovery, and that much of the steepening appeared to have occurred in response to stronger-than-expected economic data."

On the surge in commodity prices: "Regarding risks to the inflation outlook, some participants noted that increases in energy and other commodity prices as well as in the prices of imported goods from EMEs posed upside risks."

On ending QE2: "A few members noted that additional data pointing to a sufficiently strong recovery could make it appropriate to consider reducing the pace or overall size of the purchase program. However, others pointed out that it was unlikely that the outlook would change by enough to substantiate any adjustments to the program before its completion."

On the head of the Plunge Protection Team: "By unanimous vote, Brian Sack was selected to serve at the pleasure of the Committee as Manager, System Open Market Account, on the understanding that his selection was subject to being satisfactory to the Federal Reserve Bank of New York."

On Fed monetary policy-driven revolutions in Tunisia, Egypt, Algeria, Morocco, Libya, Bahrain, Yemen, and Iran: "..."

Full release:

 

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Wed, 02/16/2011 - 15:09 | 967606 unwashedmass
unwashedmass's picture

 

laughable.

you have to wonder what really goes on in these meetings.

does anyone ever mention to Bennie Boy what a catastrophic mistake he is making?

how many people are dying?

how many people are going bankrupt?

how many people are starving?

or do they all sit around and smile about how well their stock portfolios are doing.....

Wed, 02/16/2011 - 15:22 | 967660 jobs1234
jobs1234's picture

Well they unanimously reappointed Sack. I am sure he will toss in some fresh POMO today as a toast to his new-found celebrity.

I dont think the Fed really cares about anything you mentioned, or they dont think its their fault. Or Mrs. Bernanke doesnt eat human food....

Wed, 02/16/2011 - 15:45 | 967686 More Critical T...
More Critical Thinking Wanted's picture

 

You are wrong, and ZH is printing nonsense again:

On Fed monetary policy-driven revolutions in Tunisia, Egypt, Algeria, Morocco, Libya, Bahrain, Yemen, and Iran: "..."

Which part of "early August 2010 Russia banned all grain export, so bad was the heat, fire and drought" did you guys not understand?

This basic supply & demand force had catastrophic effects on North-Africa in particular, which previously imported a lot of grain from Russia. Not the Fed ...

Correct predictions were made back then, early August 2010:

Russian wheat export ban threatens higher inflation and food riots

 

The world faces an inflationary time bomb as shortages of food threaten to push prices to fresh all-time highs.

 

[August 2010]

http://www.independent.co.uk/news/business/news/russian-wheat-export-ban...

http://news.nationalgeographic.com/news/2010/08/photogalleries/100810-ru...

Of course ZH did not report on that - as the news did not fit into the 'Fed is evil!' box, right?

Do you think that this UK newspaper had a time machine and figured it out in early August that the Fed will announce QE2 in September and will implement it in October? :-)

The truth you guys are denying is awful: food demand is awfully inelastic, the west literally starves the the rest of the world until they reduce food consumption there.

The poorest countries are hit the hardest: the market does not even blink when survival becomes impossible economically. (i.e. when food prices raise above wages)

'Fed' and 'market speculation' has little to do with it - food commodity inventories are at record low levels everywhere on the planet. Or do you think the Fed and Wall Street speculators and large commodity ETFs have stashed away a few ten million tons of grain somewhere in New York, rotting away slowly, to corner the food market and to artificially drive up prices?

So the truth is that you guys are starving North Africa, every time you buy too much bread. When was the last time you threw out a loaf of bread?

 

Wed, 02/16/2011 - 15:48 | 967736 firstdivision
firstdivision's picture

You seem to negate the fact that when there are these supply issues that speculators jump in and exasperate the effect.  The more free, easy money, the more the speculations. 

Wed, 02/16/2011 - 15:57 | 967762 More Critical T...
More Critical Thinking Wanted's picture

You seem to negate the fact that when there are these supply issues that speculators jump in and exasperate the effect.

How?

In the gold or silver market I can see how they do it: they stockpile gold or silver, or they restrict supply artificially. There's also huge ETFs with a lot of physical gold/silver stored.

In the oil market they can do it by hiring tankers and storing oil for a few weeks or months and forward-selling it.

For cotton I can see how they are doing it: cotton can be stored for years if need to be - and Chinese farmers are indeed stockpiling cotton.

But the food commodities market is special: as I mentioned, global inventories are at record lows. I.e. warehouses are empty. Agro-ETFs generally do not buy and store grains, they are mostly pure financial derivatives.

Processed food storage exists but is minimal global - also the dynamics point in the other direction: everyone in the processed food industry tries to reduce stockpiles, to decrease the time to market and to improve freshness of the product.

Food cannot be produced overnight, it takes time for plants to grow. It does not get created with a mouse click. So only so much can be consumed as there gets produced.

So how do they speculate it if all supply gets bought - and it is getting bought!

You can only speculate prices up in the long run by redirecting the flow of goods into a physical buffer (or by suppressing its production).

Do you really think that tens of millions of tons of grain is buffered by 'speculators' somewhere, somehow, drying out every day and losing value every day - without anyone having noticed?

So please explain the precise mechanism of how prices can increase without physical speculation. And spare me of the "you are a Fed minion!" angle - only rational explanations please :-)

 

Wed, 02/16/2011 - 16:31 | 967865 Raynja
Raynja's picture

the precise mechanism of how prices can increase without physical speculation....
They are priced in dollars which are decreasing in value. Additionally, when people expect inflation they move their purchases forward and start to hoard (canned veggies stay good a while).

Wed, 02/16/2011 - 16:36 | 967874 More Critical T...
More Critical Thinking Wanted's picture

They are priced in dollars which are decreasing in value.

I stopped reading there ...

Commodities are priced in USD, but their value is global.

So if the USD drops by 1% on a day with no significant oil news, oil's price will increase by 1%.

I.e. the real price of oil to India or Russia or Europe (the price of oil exchanged into their own currencies) stays exactly the same.

Here's a specific calculation I made that show how commodities move inversely with the dollar index, and how this has zero effect on commodity prices for countries that trade in USD but which have their own currencies:

http://www.zerohedge.com/article/did-wikileaks-confirm-peak-oil-saudi-sa...

 

Wed, 02/16/2011 - 17:06 | 967968 tmosley
tmosley's picture

Of course you stopped reading there.  You don't read much at all, actually.  You keep telling everyone where you stop reading, but you never really say why.

I know.  It's because if you kept reading, the cognitive dissonance would make your head explode.

You ignore that EVERY asset class except real estate is rising at the same time.  You just pull out this dumbshit argument about droughts in Russia, the EXACT SAME arguments used by the Soviets as an excuse as to why they couldn't feed their eaters.

How does it feel to be totally unwanted?

Wed, 02/16/2011 - 18:59 | 968193 More Critical T...
More Critical Thinking Wanted's picture

You ignore that EVERY asset class except real estate is rising at the same time. 

That's not really true once you factor out the mechanic dollar effects from the commodity prices, and I have pointed it out several times already.

The dollar index weakened by 20% from June 2010 to November, almost linearly:

http://www.bloomberg.com/apps/chart?h=200&w=280&range=1y&type=gp_line&cf...

That's a baseline effect in all commodity charts, the inverse of the dollar index shows up: you have to factor that out of commodity charts before yelling 'correlation!'.

For example check this non-energy commodity index:

http://www.bloomberg.com/apps/chart?h=200&w=280&range=1y&type=gp_line&cf...

See the drop of 7.5% from 14 to 13 starting in early November?

That was almost purely a dollar baseline effect: if you check the dollar index above you will see that the dollar strengthened by 7% in exactly that time-frame.

It did not affect any European, African or Russian buyers though - what they 'lost' on the 7.5% dollar strengthening they mostly won in the commodity index drop of 7%.

FYI, there were several QE2 POMOs in that timeframe.

I have pointed out this relationship numerous times already, but you are simply not listening to reason.

 

Wed, 02/16/2011 - 19:03 | 968255 More Critical T...
More Critical Thinking Wanted's picture

 

Of course you stopped reading there.

Yes, because in that sentence he made a critical mistake that rendered his reasoning invalid.

A more detailed explanation (with charts) about the inverse relationship between commodity prices and the value of the dollar can be found in my reply above:

http://www.zerohedge.com/article/january-fomc-minutes#comment-968103

 

Thu, 02/17/2011 - 00:36 | 969186 Raynja
Raynja's picture

You're a fucking retard, likely with a phd and a job at the fed.... why do you never mention china? maybe because if you look at the two largest economies in the world that price purely on the dollar with no exchange rate effects your whole argument disappears. you have some valid points(i'm sure you're not reading at this point), but printing money does have a very real effect on the price of all things in an economy. Is that the only thing affecting commodities? Not by a long shot. Is it a piece of the puzzle? Absolutely.

The only critical mistake I made was trying to speak to someone who can't read and thinks a phd gives them real world understanding. As I wrote above this is an expectations problem. Run a regression on expectations and not the value of a dollar against a basket of free floating currencies and your analysis falls apart.

Wed, 02/16/2011 - 17:08 | 967944 DisparityFlux
DisparityFlux's picture

 

From "Drought ruins Russia wheat, U.S. says no world crisis". by Pavel Polityuk and Denis Dyomkin, KIEV/TAGANROG, Russia | Thu Aug 12, 2010 1:18pm EDT [1]

(Reuters) - As Russia faced drought losses on a quarter of its grain area and Pakistan feared floods had ruined half a million tons of wheat, the U.S. government slashed world wheat crop estimates but said there was no global crisis.

The U.S. Agriculture Department (USDA) reduced its forecast for the world wheat harvest by 2.3 percent on Thursday to 645.73 million tons in its August report, below the 650.02 million tons traders expected.

But its authoritative monthly report said the world stocks-to-use ratio, the amount of wheat available in proportion to consumption, was estimated at 26 percent, well above the 20.3 percent seen in 2007/08 when food shortages sent prices soaring and led to riots.

The lowered estimate prompted a surge in Chicago wheat futures prices, which had fallen 10 percent from two-year highs touched last week. At 9:33 a.m. CDT (1433 GMT), CBOT September wheat futures were up 19 cents at $7.13-3/4 a bushel.

...

[1] http://www.reuters.com/article/2010/08/12/us-russia-heat-idUSTRE6751T820...

Let me see.  I can get cheap money (credit) and want to speculate to make more money (profit), what should I buy?

Decisions, decisions, decisions.

Wed, 02/16/2011 - 17:10 | 967987 More Critical T...
More Critical Thinking Wanted's picture

 

Let me see.  I can get cheap money (debt) and want to speculate to make more money (credit), what should I buy?

So please outline how this would impact physical delivery prices of wheat in the long run.

Not futures prices. Futures are created in pairs: in 95% of the cases you are buying from another speculator or you are selling to another speculator. It's a zero-sum game - and 95% of the positions are closed out before the delivery day arrives.

So your games can increase price volatility temporarily - but how can they impact physical delivery prices permanently, over 6+ months?

Lets see an example: you have say pocket change from Goldman Sachs and want to use this 1 billion dollars to buy commodities and you came up with a great plan to corner the market and speculate up its price.

You consider gold - you can buy 25 tons of gold bullion for 1 billion dollars and store it easily - and it will last forever. (but you wont be able to manipulate prices much, mind you)

Or you consider wheat. 1 billion dollars will buy you about 3 million tons of wheat. What will you do with it? Do you know how much space 3 million tons of wheat takes to store properly and in how many locations? Do you know how quickly it deteriorates?

 

Wed, 02/16/2011 - 17:25 | 968034 tmosley
tmosley's picture

lol, the economic equivalent of "For every action there is an equal and opposite reaction, therefore nothing can ever move."

Here's a hint for you, Soviet boy:  futures contracts are created AND destroyed in pairs.  If you want to close a position, you have to buy someone else out.  Flood the market with cheap money, and the person holding the other side of that contract is going to demand more money to let you out of your contract.  If you don't close out your contract, you have to provide or take delivery.

Hard wheat berries last indefinitely.  It's called a granary.  You can store grain there for decades.  Sorry to burst your bubble :(

Wed, 02/16/2011 - 17:57 | 968103 More Critical T...
More Critical Thinking Wanted's picture

 

futures contracts are created AND destroyed in pairs.  If you want to close a position, you have to buy someone else out.  Flood the market with cheap money, and the person holding the other side of that contract is going to demand more money to let you out of your contract.  If you don't close out your contract, you have to provide or take delivery

Nonsense, the "other side" will have to close as well by delivery day - unless they are willing to provide or take delivery. So while it increases volatility, it's a zero sum game between speculators.

The sum of all open contracts at delivery date equals physical deliveries provided and taken and as such it follows supply and demand constraints.

Hard wheat berries last indefinitely.

Only if dried a lot, and if stored cold enough for a long time - both cost significant amounts of energy. Think temperatures below 60F (15C).

Guess whether Egypt can manage the latter? Or Russia, in a heat wave? How the energy costs of drying, keeping dry and cold mount up?

In practice grain is only dried enough to make it easily to the expected delivery date without growing fungus and to meet the moisture maximum value of the buyer.

Also, do you suggest that there's physical stockpiling of grain now that there's record low stockpiles, all around the globe?

For just 1 billion dollars of 'easy money' you'd have to buy and handle 3 million tons of wheat. :-)

These are facts are putting holes into your Fed theory again - and you are not answering them at all, you are moving on to the next strawman argument ...

 

Wed, 02/16/2011 - 18:00 | 968113 tmosley
tmosley's picture

You really need to stop making shit up.  If you had to dry them "a lot", then they never would have been able to have granaries in pre-modern times.

Christ, you are dumb as shit.  Get out.

Wed, 02/16/2011 - 18:13 | 968144 More Critical T...
More Critical Thinking Wanted's picture

 

You really need to stop making shit up.  If you had to dry them "a lot", then they never would have been able to have granaries in pre-modern times.

Do you actually know how they dried grains in pre-modern times?

It was actually very labor-intensive: they had grain-drying ovens in cold & wet countries and they parched it by the sun elsewhere. If they did not manage to dry the grain by the winter, or did not dry it enough, or did not store it properly and it caught moisture, the grain got fungus and they starved and even died.

That's one of the a reasons why agriculture took 20,000 years to spread from the warm Middle-East to Europe ... It's harder than it looks.

 

Wed, 02/16/2011 - 17:09 | 967973 karzai_luver
karzai_luver's picture

a major problem you have is that you seem to imply that food is composed of grains. Nope.

 

The stuff "food" is composed of , especially your processed foods(haha) is far from "grains" i am sure you see coming from the vast plains.

Lots of the stuff your "foods" are made from have a shelf life of decades.

 

 

Wed, 02/16/2011 - 17:25 | 968007 More Critical T...
More Critical Thinking Wanted's picture

 

a major problem you have is that you seem to imply that food is composed of grains. Nope.

I was responding to the claim in the article: that North African revolutions should be blamed on the Fed.

FYI, especially in developing countries, food import mostly consists of grain and (to a much lesser degree) sugar.

Grain imports by North African countries were hit especially hard, because one of their (geographically close and connected via sea routes) trade partner was Russia - and Russia enacted a grain export ban in early August 2010.

That is why I made a specific argument about grain commodities and Russia - it is very much relevant to the North African food situation.

 

Wed, 02/16/2011 - 17:29 | 968046 tmosley
tmosley's picture

Soviet Blamestorming 101 teaches us that there is always a drought, or a fire, or a flood SOMEWHERE.  Find it, and blame the disasterous consequences of your half-baked policies on it.

So easy, a Princeton Economics PhD could do it!

Wed, 02/16/2011 - 18:13 | 968149 More Critical T...
More Critical Thinking Wanted's picture

 

I'm pointing out well-known facts that are behind increased food prices in Egypt and Tunisia.

You can counter them by proving them wrong (you did not do that) or by proving my logic wrong (you did not do that either).

Instead after a few failed attempts to prove me wrong you started insulting me.

That tells us the quality of your argument.

 

Wed, 02/16/2011 - 21:08 | 968624 Trenchf00t
Trenchf00t's picture

More Critical Thinking Wanted seems to be asking about how speculation on something like food could actually work. While it is true that shortages and manipulation of supply (such as hoarding) play a significant role, MCTW appears to be unaware of the part that securitization plays. Put succinctly, it is when contracts for future delivery of a commodity are bundled up into a financial instrument and traded.

Up until some years ago, securitization of futures in important stuff like food was heavily regulated, and used mainly by commercial hedgers (companies in the food business that needed to hedge against unfavorable price action). Today it is virtually unregulated, and has become part of the arsenal of large speculators. It can be argued that speculative securitization plays a large role in the prices of commodities today.

Now it is possible for your average stuffed suit at JPM or Goldman to starve a family in Algeria with the few strokes of a keyboard. Securitization is automated by computer programs and the resulting instruments traded on exchanges, often churning the same futures contracts over and over driving up the price, starving Habib's kids.

This activity is very risky, but money is cheap right now, so premium on risk is virtually zero. Cheap money causes global problems, hence the vitriol on ZH for our gentle uncle Ben. They call him Blackhawk Ben, Chairsatan, etc because, in a way, he is. An FOMC circle jerk can result in hunger pangs across the world because they provide the smack that fuels our hopelessly addicted crackhead Too Bigger To Fail bankers making the Trades That Kill.

Peep this to get started:

http://seekingalpha.com/article/75032-the-commodity-conundrum-securitiza...

 

Wed, 02/16/2011 - 18:20 | 968167 New_Meat
New_Meat's picture

"...exasperate the effect. "

Yep, and the long buyers are exacerbated ;-)

- Ned

Wed, 02/16/2011 - 15:51 | 967742 HamyWanger
HamyWanger's picture

I am a troll, but I feel forced to answer you, because I've never seen so much horrible stupidity and hypocrisy in a post.

Admitting you are right, shall we remember you that the inflation did not stop at grains, but targeted primarily cotton and sugar (not aware Russia is a big exporter of these).

You know, I've nothing against emotional, poors-must-be-helped-by-gov socialists, but I don't understand what interest has a socialist in defending the Federal Reserve and the banking system like you do, a corrupted bunch of ultrarich.

Wed, 02/16/2011 - 16:11 | 967778 More Critical T...
More Critical Thinking Wanted's picture

Admitting you are right, shall we remember you that the inflation did not stop at grains, but targeted primarily cotton and sugar (not aware Russia is a big exporter of these).

Cotton price movement is clearly detached from other commodities and the reasons are reasonably well understood:

Chinese Take a Cotton to Hoarding

 

Yu Lianmin, a cotton farmer in Huji, China, harvested 6,600 pounds of cotton this year. Despite record cotton prices, he didn't sell any of it.

http://online.wsj.com/article/SB1000142405274870468060457611042377734929...

Cotton can be stored for a long time - for years. So it is a prime target for physical speculation and hoarding.

Grain on the other hand cannot be hoarded nearly as well: it takes quite some space to store it and the per tonnage value is relatively low. The bigger problem is that when it is stored it degrades quickly. Every time it is moved it has to be re-dried again during which it loses water - and value. Every week it is stored it loses water - and loses value. Finally it rots.

FYI, North African revolutions did not break out over cotton shortage ...

Also, here's a graph of global food commodity prices versus all commodities:

https://lh5.googleusercontent.com/_VgJQTp0Bsf0/TU6_YfTtTSI/AAAAAAAAAMU/2...

Food was mostly flat during most of QE1 - so rampant speculation and easy liquidity did not affect it - as expected. Food prices are almost only supply & demand controlled.

So instead of insulting me could you please at least consider my arguments and think about them rationally?

 

Wed, 02/16/2011 - 16:17 | 967796 HamyWanger
HamyWanger's picture

And why do you think this Chinese peasant is hoarding it?

He sees it is going higher each day, and I don't think he believes that because he is aware of QE2 (I'm not even sure he knows who Ben Bernanke is).

According to you, German farmers who hoarded their food caused the hyperinflation?

Speculators caused the sovereign debt crisis?

Short sellers caused the 2008 panic?

Wed, 02/16/2011 - 16:31 | 967861 More Critical T...
More Critical Thinking Wanted's picture

And why do you think this Chinese peasant is hoarding it?

Supply squeezes are phenomena as old as investing itself: they are self-reinforcing spirals so the Chinese farmer will see rising prices, which restricts supply, which causes even more price increases, which restricts supply even more, which increases the price even more - etc.

The hoarding effect is probably also strengthened by Chinese monetary authorities who are keeping the yuan artificially devalued, to undercut US export prices. So Chinese farmers probably also see cotton as a 'store of value' better than yuans ...

Up to the point they consider it expensive enough to sell, or some sudden negative event comes when everyone comes out with their stockpile and the price collapses.

If you think that this is not happening here then you need to remember the four most dangerous words in investing:

http://tinyurl.com/4hgurzo

 

Wed, 02/16/2011 - 17:07 | 967977 tmosley
tmosley's picture

It is fairly clear where you "stopped reading" on this comment as well.

Disingenuous fuck.  Get out.  You aren't wanted here.

Wed, 02/16/2011 - 19:22 | 968317 More Critical T...
More Critical Thinking Wanted's picture

 

According to you, German farmers who hoarded their food caused the hyperinflation?

No.

Speculators caused the sovereign debt crisis?

No.

Short sellers caused the 2008 panic?

No.

Each of these historic events has a different, complex background.

The background of the current global food price increases is predominantly old-fashioned supply/demand forces, not 'the Fed', 'speculators' or 'short sellers'.

There's no evidence of hoarders either - at least none that would affect North Africa's food prices, the subject of my original argument about this article.

Get used to it: there's more and more people living on a planet that is getting a warmer climate and that is getting less predictable weather.

 

Wed, 02/16/2011 - 16:13 | 967806 jobs1234
jobs1234's picture

Um, every commodity on the face of the planet earth is rising parabolically. The only asset that isnt rising parabolically is real estate (although you wouldnt know it from the real estate stocks)

To argue that speculation has nothing to do with food prices is ridiculous. We have had food shortages, shocks, etc... before but never have food prices risen this parabolically in such a short period of time. Never. Go back in history and find a time when it happened within 6 months like it has now.

Furthermore, as every basic economic student knows, to curtail speculation and/or demand, you choke off its source. Do you really think Volcker would just be sitting here singing la-de-da and letting Sack run amok with POMO? He would probably be out in force, discouraging speculation, raising rates, putting the fear of God in the speculators.

Bernanke doesnt do that, he basically makes them feel like there is no consequence or fear of loss to speculation. Want to buy Cotton up 44% in 6 months? Here is some fresh money to do so.

AND you fail to account for what the heck we are going to do about the rising prices of food? Your solution appears to be - just leave rates low and let the prices rise. 

I still cant find anyone outside the stock market who thinks its a good idea to keep rates at zero. Whats the reason at this point? Seriously, why does it have to be at zero right now?

Wed, 02/16/2011 - 16:21 | 967825 jobs1234
jobs1234's picture

"Food was mostly flat during most of QE1 - so rampant speculation and easy liquidity did not affect it "

And how did it conveniently go parabolic right when QE2 was announced? And why wont Ben pull a Volcker and just put the fear of God in speculators? You dont think food prices would sink rapidly if Ben announced an all out war on speculators and said he was pulling ZIRP effective immediately?

I understand the supply issue but every commodity on the face of the planet earth suddenly started rising in price parabolically in August.

Wed, 02/16/2011 - 16:57 | 967932 More Critical T...
More Critical Thinking Wanted's picture

 

"Food was mostly flat during most of QE1 - so rampant speculation and easy liquidity did not affect it "

And how did it conveniently go parabolic right when QE2 was announced?

I have answered that in the post you replied to ...

No, food prices did not start going up in September/October when QE2 was announced and started.

They started rising when record heat waves in eastern Europe devastated the grain harvest:

Weather forecasters said by Monday the unprecedented heatwave had lasted for an uninterrupted 50-day streak in Moscow and central Russia, with day temperatures hovering at 32 degrees Celsius (90 Fahrenheit) or above.

http://ca.reuters.com/article/topNews/idCATRE6751T820100810

Check the chart:

https://lh5.googleusercontent.com/_VgJQTp0Bsf0/TU6_YfTtTSI/AAAAAAAAAMU/2...

Food prices started going up in mid-summer of 2010, when the record heatwaves struck and when the big fires raged in Russia.

I even cited a contemporary European newspaper written on August 6, 2010 (i.e. more than a month before QE2 was even hinted at), predicting what indeed happened:

Russian wheat export ban threatens higher inflation and food riots


The world faces an inflationary time bomb as shortages of food threaten to push prices to fresh all-time highs.

 

[August 2010]

http://www.independent.co.uk/news/business/news/russian-wheat-export-ban...

http://news.nationalgeographic.com/news/2010/08/photogalleries/100810-ru...

 

Wed, 02/16/2011 - 17:20 | 968003 thedrickster
thedrickster's picture

You lying fucker, I evisercated this statement a couple days back;

http://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximize...

From July 10 on DBO, DBA, QQQQ & IWM begin take flight together with oil trailing the pack post QE2.

You cannot out of one side of your mouth scream "drought" and out of the other dismiss the correlative moves in broad stock indicies as "inverse USD".

Your own chart proves you a quack;

https://lh5.googleusercontent.com/_VgJQTp0Bsf0/TU6_YfTtTSI/AAAAAAAAAMU/2...

Inverse USD aside all commodities take flight, with food admittedly at a slightly steeper slope. This is the supply shock component, the Gamma, fucker. The trend in your own chart that is obvious to seemingly anyone but you, is captured nicely by my sophomoric, flawed, non-FRB approved, USD denominated one.

Go back to the FRB funded ivory tower shithole from wence you came.

 

Wed, 02/16/2011 - 20:36 | 968554 More Critical T...
More Critical Thinking Wanted's picture

 

Inverse USD aside all commodities take flight, with food admittedly at a slightly steeper slope.

You need to think about the reason why 'all commodities' (which includes food) rise at a 'not as a steep slope' as food.

Hint #1: there must be components that rise much less.

Hint #2: metals:

http://www.indexmundi.com/commodities/?commodity=metals-price-index&mont...

With the dollar weakening factored out they were basically flat while food prices soared in global price, from August to December.

And do you think that somehow metals were exempt from the desire of 'QE2 fueled speculation'? Your claim is nonsensical on its face.

Most agricultural commodities were going up because (duh) the out of whack weather all around the globe affected all sorts of plants and trees, it did not single out grains. 2010 was the hottest climate year on record ever:

http://data.giss.nasa.gov/gistemp/tabledata/GLB.Ts+dSST.txt

Do you think there might be a connection between record weather events and record supply/demand pressures in agricultural commodities?

Paging Captain Obvious!

Commodities not affected by the weather, such as the metal index I linked to, stubbornly refused to rise on QE2 :-)

Here's another example of the inverse dollar effect (repeated from an earlier post):

The dollar index weakened by 20% from June 2010 to November, almost linearly:

http://www.bloomberg.com/apps/chart?h=200&w=280&range=1y&type=gp_line&cf...

That's a baseline effect in all commodity charts, the inverse of the dollar index shows up: you have to factor that out of commodity charts before yelling 'correlation!'.

For example check this non-energy commodity index:

http://www.bloomberg.com/apps/chart?h=200&w=280&range=1y&type=gp_line&cf...

See the drop of 7.5% from 14 to 13 starting in early November?

That was almost purely a dollar baseline effect: if you check the dollar index above you will see that the dollar strengthened by 7% in exactly that time-frame.

It did not affect any European, African or Russian buyers though - what they 'lost' on the 7.5% dollar strengthening they mostly won in the commodity index drop of 7%.

FYI, there were several Fed QE2 POMOs in that timeframe, still somehow they had no effect on these commodities.

Your claims are simply false.

 

Wed, 02/16/2011 - 17:11 | 967988 thedrickster
thedrickster's picture

This is where Commissar More Critical Thinking Wanted goes completey off the rails and yet remains arrogant enough to provide a response equivilant to "duh stupid, you are making a 101 error":

http://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximize...

The commissar will not acknowledge the obvious to job1234's point depicted on the chart above, that beginning in late August EVERY SINGLE RISK ASSET went to the moon. Look at the chart, R2K, Qs all trading like the commodity in a vaccum he describes. He casually spouts "inverse USD correlation" in order to call me a dolt without considering the implications therein.

Inverse USD correlation is my whole fucking point, don't you see risk inherent in commoditizing the entirety of US capital markets? Wealth effect I suppose, every thing is peachy.

He drones on and on about China supply shocks, fuel subsidies and caloric demand and forgets the 800lb mother fucking gorilla in the room, the Yuan peg. When called he shrugs it off saying "if they are dumb enough serves them right". Well no shit MCTP (and stunning really that you would take umbarage with such a Soviet bit of planning) but it doesn't absolve the peg from causation.

The Bernank would have already met Marie Antoinette but for the peg, it is a race to the bottom and everyone but you seems to understand this. Ignoring for a moment the collateral damage to well, my future, The Bernank does seem to be winning.

 

 

 

Wed, 02/16/2011 - 20:54 | 968608 More Critical T...
More Critical Thinking Wanted's picture

 

beginning in late August EVERY SINGLE RISK ASSET went to the moon

That's simply false, see my detailed response (with charts) at the following link:

http://www.zerohedge.com/article/january-fomc-minutes#comment-968554

For example commodities like the metals index stayed flat from August to December. Funny how commodities that are unaffected by out of whack weather ignored QE2 liquidity? :-)

Btw., I just noticed that even the date in your sentence is false: the rise did not start in August. If you make the chart just a bit wider:

https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximiz...

You will see that the agricultural index (DBA, blue line) starts rising sometime in June - when record heatwaves started hitting Europe:

Weather forecasters said by Monday the unprecedented heatwave had lasted for an uninterrupted 50-day streak in Moscow and central Russia, with day temperatures hovering at 32 degrees Celsius (90 Fahrenheit) or above.

http://ca.reuters.com/article/topNews/idCATRE6751T820100810

You can count back those 50 days from the publishing date on August 10 to the beginning of the rise of the blue line in the chart - with about one week accuracy, to end of June.

Someone knew the likely relationship between extreme heat in Russia and elsewhere (during a solar minimum!) and the future price of agricultural commodities really well.

We are almost one year later and you could still not make a winning trade based on that information. Absolutely amazing! :-)

FYI, QE2 was announced only in September.

 

Wed, 02/16/2011 - 23:21 | 969015 thedrickster
thedrickster's picture

"For example commodities like the metals index stayed flat from August to December. Funny how commodities that are unaffected by out of whack weather ignored QE2 liquidity? :-)"

You really to try to paper over bullshit with quantity.

http://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximize...

Look at those base metals NOT trending with DBA from June-Aug and then from QE2 onwards.

 

Wed, 02/16/2011 - 18:24 | 968175 New_Meat
New_Meat's picture

Hamy-

"I am a troll,..."

but entertaining, not least b/c of the false flag.  I enjoy your work to improve your troll games, please continue.

At least with your posts, one can more or less evaluate and agree/disagree/consider.

Thanks,

- Ned

Wed, 02/16/2011 - 15:50 | 967743 tmosley
tmosley's picture

So there are also record sugar, coffee, corn, soybean, cotton, cocoa, and orange juice production shortfalls?  I guess crude, heating oil, natural gas and copper are having production problems as well.

You don't see that you are spouting the same shit that the Soviets did to excuse themselves from any blame for the starvation of their people.

Wed, 02/16/2011 - 15:55 | 967756 HamyWanger
HamyWanger's picture

"You don't see that you are spouting the same shit that the Soviets did to excuse themselves from any blame for the starvation of their people."

More Critical Thinking Wanted is a soviet.

For him, anything -- including death, corruption, extorsion -- is legitimized by the "gov must help the poors and the sick and the disabled and the old and the blind" mantra.

You can't reason with such men: they were lauding the policies of Rudolf Von Havenstein in 1922. More Critical Thinking Wanted is their genetic son.

Wed, 02/16/2011 - 16:10 | 967794 More Critical T...
More Critical Thinking Wanted's picture

 

The cotton argument is wrong, I answered it in this comment in detail:

http://www.zerohedge.com/article/january-fomc-minutes#comment-967778

And believe me, North Africans did not revolt over cotton, nor over coffee, soybean, cocoa or orange juice :-)

And yes, Russia (and eastern Europe) produces a lot of corn.

 

Wed, 02/16/2011 - 16:14 | 967809 tmosley
tmosley's picture

North Africans did not revolt over cotton, coffee, soybeans, cocoa, or orange juice, therefore there is no inflation?

Is that your argument?

Clearly the central planners just need more power.  If we could give them the ability to control the weather, everything would be fine.  They could print forever, we would all be rich, and nothing bad would ever happen ever.

Wed, 02/16/2011 - 16:23 | 967831 More Critical T...
More Critical Thinking Wanted's picture

 

North Africans did not revolt over cotton, coffee, soybeans, cocoa, or orange juice, therefore there is no inflation?


Is that your argument?

No.

My arguments are written down in my reply - but you need to read them first before replying to them.

You mentioned cotton, and if you take just a quick look at a cotton price chart and compare it with grain prices you'll see how differently they behave.

I usually stop at your first untruth and declare the totality of your reply bogus. If you want me to consider and respond to any partial truth that might be left in the rest of your post then will need to strip it of untruths first.

 

Wed, 02/16/2011 - 16:39 | 967888 tmosley
tmosley's picture

Blame it on the weather!  The people in charge do no wrong!

Go die, Soviet boy.

Wed, 02/16/2011 - 16:17 | 967815 jobs1234
jobs1234's picture

What I have find hilarious is - HOW DO YOU THINK ZIRP HELPS THE POOR?

What is the Fed doing right now to help the poor? Name one thing they are doing. Last time I checked, poor people live off food stamps (which are becoming less valauble by the week as food prices start to rise) save their savings in the bank (which gives them .005 interest) and are watching as every edible and non-edible commodity is rising in price parabolically.

the only reason our poor arent rioting yet is because we are subsidizing them.

Wed, 02/16/2011 - 16:26 | 967853 Sancho Ponzi
Sancho Ponzi's picture

'And yes, Russia (and eastern Europe) produces a lot of corn.'

No, they don't

The US and Argentina produce over 60 million metric tons of corn, whereas Russia produced 3.1 million metric tons in 2010. 

http://www.ers.usda.gov/Briefing/corn/trade.htm

http://www.indexmundi.com/agriculture/?country=ru&commodity=corn&graph=production

 

Wed, 02/16/2011 - 17:18 | 968008 thedrickster
thedrickster's picture

I LOVE when the commisar is eviseracted with basic clear cut data that rips right through his Soviet obfuscations.

Wed, 02/16/2011 - 17:55 | 968100 whatz that smell
whatz that smell's picture

where can i get a gif like this?

Wed, 02/16/2011 - 16:22 | 967835 HoofHearted
HoofHearted's picture

Oh, lack of critical thinking, there are Fed haters and there are Fedophiles. And you seem to be the nasty Fedophile type.

Wed, 02/16/2011 - 16:42 | 967897 tmosley
tmosley's picture

Fedophiles are more dangerous to children than pedophiles. 

Won't someone think of the children!!??

Wed, 02/16/2011 - 16:41 | 967894 Hang The Fed
Hang The Fed's picture

I believe that the truth, ultimately, is that we need to do more for ourselves.  During WWII, people grew victory gardens to maintain staple supplies.  Fifty years later, and the most gardening that gets done, on average, is some dimwit buying pansies for the fucking flowerpots.  Shameful...but the shame goes around.  Shame for the people who EXPECT the government to take care of them, and shame for the government and fraudulent financial system for treating such basic needs as a vehicle to make hollow profits.  Ron Paul had it right at CPAC, when he proffered the idea that lower taxes could be used as a way to maintain infrastructure so long as we don't come crying to the government to manage our lives for us.  Of course, such an idea would be considered completely absurd in this pathetic social and economic paradigm in which find ourselves today.

I say, push the fucking reset button already.

Wed, 02/16/2011 - 17:54 | 968096 whatz that smell
whatz that smell's picture

where can i get a gif like this?

Wed, 02/16/2011 - 15:24 | 967663 firstdivision
firstdivision's picture

Order pizza, crack open some beer, talk about the hookers they had over the weekend, who got what VD, and charge it all to the American Taxpayer.  The actual notes you and I read were typed up by some intern in a broom closet.

Wed, 02/16/2011 - 20:45 | 968596 topcallingtroll
topcallingtroll's picture

Uh...I keep asking the question but don't seem to get any good answers.  So you suggest we stop QE2 now, allow deflation to occur, and then

less people will die?

less people will go bankrupt?

Less people will starve?

Less people will be unemployed?

Wed, 02/16/2011 - 15:10 | 967607 Rogerwilco
Rogerwilco's picture

Dopes smokin' rope.

Wed, 02/16/2011 - 15:11 | 967616 unwashedmass
unwashedmass's picture

 

do we think they pretend there's an actual recovery even when they are alone?

Wed, 02/16/2011 - 15:26 | 967669 aheady
aheady's picture

lol

Wed, 02/16/2011 - 15:13 | 967622 SheepDog-One
SheepDog-One's picture

OK FED, its all so good? Then raise rates from 0% to just 2 or 3%, and stop the POMO then lets see what you ass hats have!

Wed, 02/16/2011 - 15:16 | 967638 unwashedmass
unwashedmass's picture

 

did anyone else ever stop to wonder ... yeah, they are spending a fortune in POMO to move up the general market...

how much are they spending to hold DOWN the HUI/XAU stocks?

I watch these every day and there is seriousy holding action going on....its the last sector they want the peasantry to notice.....

today is particularly bad -- they have been trying to hold HL under 10 bucks for over two hours now.

How much are they spending do this crap?

Wed, 02/16/2011 - 15:15 | 967634 jobs1234
jobs1234's picture

"Conditions in financial markets improved somewhat further over the intermeeting period"

Apparently being at 1340 on the S&P still requires ZIRP. Will we not get an interest rate hike until Dow 15000?

Wed, 02/16/2011 - 15:16 | 967635 carbonmutant
carbonmutant's picture

Interesting... And Geithner is telling the Senate that they need to start making spending cuts now, not later. The current Draconian spending cuts are not enough...

Wed, 02/16/2011 - 15:16 | 967636 c-rev with a twist
c-rev with a twist's picture

Bloomberg made it sound like more dissension about continuing QE

Wed, 02/16/2011 - 15:18 | 967644 cougar_w
cougar_w's picture

"..."

vry nce

Wed, 02/16/2011 - 15:22 | 967647 Wascally Wabbit
Wascally Wabbit's picture

On Ron Paul winning the CPAC straw poll 2 years in a row: "it is a non-binding, unscientific poll .....Mitt Romneycare showed a strong second."

Wed, 02/16/2011 - 15:21 | 967650 jobs1234
jobs1234's picture

And why would they possibly express disappointment about jobs? It is tragically clear to everyone that ZIRP is not creating jobs and companies are not using ZIRP to increase hiring.

 

Wed, 02/16/2011 - 15:22 | 967655 unwashedmass
unwashedmass's picture

 

everyone except Bennie Boy. So, we're all wrong, and he is right. There will be some jobs coming along here.

real soon.

Wed, 02/16/2011 - 20:44 | 968589 topcallingtroll
topcallingtroll's picture

So we should end QE and allow deflation to occur?  Will that decrease the unemployment rate?

Wed, 02/16/2011 - 15:21 | 967652 Cleanclog
Cleanclog's picture

Only a whiff of inflation, with marginal growth, but jobs miraculously reappear (or I guess that many fewer people bother to try to become employed through official channels of capture).  The Fed sure is doing a fine job micromanaging via medication and manipulation.  Ha ha ha - free markets.  

Wed, 02/16/2011 - 15:22 | 967657 TraderMark
TraderMark's picture

Lazlo Birinyi calls for S&P 2800 by 2013.

Bernanke responds "you daring me?"

Only half of that exchange was caught on video

http://www.fundmymutualfund.com/2011/02/video-lazlo-birinyi-s-could-doub...

Wed, 02/16/2011 - 15:30 | 967678 jobs1234
jobs1234's picture

"However, others pointed out that it was unlikely that the outlook would change by enough to substantiate any adjustments to the program before its completion"

"Sack specifically noted that he would like to continue to BTFD and keep tabs on his fan club at Zero Hedge"

Wed, 02/16/2011 - 15:35 | 967695 Cleanclog
Cleanclog's picture

Whoa . . . just got an alert from the NYTimes touting Fed says GDP growth may reach 3.9% in 2011.  Even NYTimes promoting kool-aid now.

Wed, 02/16/2011 - 15:43 | 967718 Bam_Man
Bam_Man's picture

Even NYTimes promoting kool-aid now.

All clogs - I mean cogs - in the same machine.

Wed, 02/16/2011 - 15:41 | 967710 docj
docj's picture

Meanwhile, in Wisconsin...

http://news.yahoo.com/s/ap/20110216/ap_on_re_us/us_wisconsin_budget_unions

Memo to the public employee unions of Wisconsin - elections have consequenses.  And enjoy your first-ever taste of what has been going-on in the dreaded private sector for 2-decades.

Wed, 02/16/2011 - 16:44 | 967904 Hugh_Jorgan
Hugh_Jorgan's picture

Don't worry you poor downtrodden Union Members. The machine will come to your aid very soon. Keep the faith, Obama will speak of your struggles, the NYT will write sterling accounts of you, and the evils that you are enduring under a conservative governor and all will be made right with the world. Kumbayah...

Wed, 02/16/2011 - 16:55 | 967930 karzai_luver
karzai_luver's picture

It's going to be hilarious to see the commie backlash as these pug/con guvs do their slash and burn act but nothing of note gets fixed.

 

They will get all the blame and the dim white horse types will be back in the saddle bigtime and I suspect for good until the end and it all melts down.

 

Coming to an election near you within 4 years.

Yowser, them ELECTIONS has some consequences allrighty.

 

 

Wed, 02/16/2011 - 19:19 | 968312 docj
docj's picture

Yep - that's certainly President Present's plan.  His joke of a "budget" is all the proof anyone needs of that.

He's obviously just hoping to kick the can to Feb 2019.

Wed, 02/16/2011 - 15:43 | 967717 primefool
primefool's picture

Tiny POMO today, talk of slowing down POMO in the minutes, growth upped huge - hmmm. Looks like the Boys want the market up big today, maybe down big tomorrow ( its OPEX after all - need one big up and on big down to clear out all those pesky options).

Wed, 02/16/2011 - 15:44 | 967724 primefool
primefool's picture

Now the trick will be to see if they can keep stocks rising based on earnings, gdp growth outlook - and wean it off POMO and the dollar killing operations. I think it will fail

Wed, 02/16/2011 - 20:41 | 968578 topcallingtroll
topcallingtroll's picture

but it is exciting to watch isn't it?  Maybe they fail.  Maybe they don't.

Wed, 02/16/2011 - 15:46 | 967729 Herman Strandsc...
Herman Strandschnecke's picture

 Why don't the 'poorer countries' grow their own food? They've had enough money from the west and I see plenty of designer gear and modern vehicles, etc on the telly when viewing the rioters. Not to mention their space programmes and weapons.

Wed, 02/16/2011 - 15:50 | 967739 primefool
primefool's picture

Fiat currency does'nt grow food. Need arable land, and fresh water - which in in dire short supply.

Wed, 02/16/2011 - 15:56 | 967758 youngman
youngman's picture

$8500 an acre in Iowa now and rising....

Wed, 02/16/2011 - 16:49 | 967921 karzai_luver
karzai_luver's picture

water climate land TOO many peeps and looters from the top 1-2% that will not allow any but their asshole buddies to profit.

 

that is the short course for ya.

 

Wed, 02/16/2011 - 15:46 | 967731 ThirdCoastSurfer
ThirdCoastSurfer's picture

How is it that a 3% increase in $15t of GDP is never equated to an increase of about $450b making the net effect of injecting $600b of QE2 somewhat oversimplified but valid net effect of -$150b (not to mention the $1.5t deficit and all the rest)?

 

Wed, 02/16/2011 - 15:51 | 967745 Misean
Misean's picture

Cuz it's EZer to just BTFD...where'd I put my double Patron margaritta?

Wed, 02/16/2011 - 17:58 | 968108 Catullus
Catullus's picture

Because GDP is a measure of final good/services produced in a given year. If the goes to flipping houses or bonds or joosing the stock market, nothing is getting produced.

I don't disagree that one needs to think about the net effects of the fed helicopter drops. Comparing it to GDP ain't the way to do it though

Wed, 02/16/2011 - 15:52 | 967747 primefool
primefool's picture

The Dollar is getting punished - makes no sense in light of the news - but the Bots need the dollar down to push up stocks to make those put options worth-less.

Wed, 02/16/2011 - 15:55 | 967754 primefool
primefool's picture

Maybe the game plan is to punish the dollar now - to get the stocks moving up - then right before the close push the dollar way up. So then they can establish a new relationship - where the dollar does'nt have to be killed for stocks to go up. They really need to rejigger the algos - its an election year after all, and Bennie needs to stop his BS.

Wed, 02/16/2011 - 15:58 | 967763 papaswamp
papaswamp's picture

"Fuck the little man".. says the FOMC. "Their plight isn't ours to worry."

Wed, 02/16/2011 - 16:14 | 967810 buzzsaw99
buzzsaw99's picture

the fed this and the fed that. fuck the fed. die bitchez!

Wed, 02/16/2011 - 18:05 | 968129 whatz that smell
whatz that smell's picture

"Kill the pig. Cut her throat. Bash her in."-- willy golding, lord of the flies, bitchez.

Wed, 02/16/2011 - 16:33 | 967868 gookempucky
gookempucky's picture

More ME fires as now Iraq is getting in on the people power.

http://english.aljazeera.net/news/middleeast/2011/02/2011216114058147154.html

Wed, 02/16/2011 - 16:43 | 967905 karzai_luver
karzai_luver's picture

If the U.S. had any sack at all, we would send in some of our black ops dudes on a one way mission to take out those crazy mullahs and hand that place over to anyone under 35.

 

I assure you most of them do not want to get nuked or kill the great Satan. They want what we got to sell.

 

 

Take out those mullahs now!

 

Wed, 02/16/2011 - 16:35 | 967875 Tic tock
Tic tock's picture

'Yes, we have an Open markets operation and strangely, the markets look exasctly like what we thought they would look like...' -explain this you clowns, how is it that WTI is in a state of supply glut yet the price is trending higher?

Wed, 02/16/2011 - 16:40 | 967890 karzai_luver
karzai_luver's picture

These fucking robbers should have to attend these fomc criminal cabal meeting dressed in a clown costume for each of them so we can tell them apart.

 

Bennie could get the big red nose and so on and so forth.

 

They will be the end of this place if not taken out and it is likely too late anyway, bro.

WB7 needs to get to work on the costumes post haste.

 

Wed, 02/16/2011 - 16:41 | 967895 Bansters-in-my-...
Bansters-in-my- feces's picture

Hey Tyler,and crew,thanks for letting me in off the porch. Great work from all at ZH

And as far as the Fed goes ,the sooner we all call the piece of shit Cartel,what they are instead of the nice goverment sounding name they are given,the sooner some of the blind and dumb bimbos that think the Fed is a branch of the USGovt,will maybe catch the paly....we could cross are fingers anyways.

Pieces of shit Bankster Cartel 

Wed, 02/16/2011 - 17:03 | 967958 Bansters-in-my-...
Bansters-in-my- feces's picture

I think More Critical T... and WammyHanger are n love,Valentines in the air and all still I guess.

Wed, 02/16/2011 - 17:56 | 968104 HedgeFundLIVE
HedgeFundLIVE's picture

hate to add to the bear fuel... well, not really. but yes, laughable. what a delusional market we're in: http://www.hedgefundlive.com/blog/10-reasons-the-stock-market-is-delusional

Do NOT follow this link or you will be banned from the site!