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Rumor Of Another Discount Rate Hike
A rumor is circulating that barely a month since the last hike, the Fed is about to hike the discount rate (which is completely irrelevant of course, due to the whole $1.2 trillion in excess reserves thing) as early as today. When aksed for commentary, the Fed spokesman had no comment.
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Completely irrelevant, agreed. The banksters (the Fed) will not do anything of relevance ever, period. What can they do? The doelarr is dead. "Please turn off your cellphones, and enjoy the movie." Now playing...."Weekend at Bernie's 2: Sovereign Debt Crisis"
Snack bar is pushing energy credits during the matinee.
HAHAHA! Energy credits and the Hollywood Futures Index.
FF showing JUN rate hike to 50bps as 14.1% odds vs 9.8% yesterday (this is only back to one week ago levels though so dont get too excited). TSYs were flattening before this started but as equities sold off, TSY buyers re-emerged with a preference for short-duration which stymied some of that flattening. Credit leaking wider here also...FINLs underperforming with Greek/Sovereign contagion PLUS curve flattening/rate hike fears...nothing to see here, move along
Shorter credittrader: "Ignore this, they're just fucking with us for the laughs."
Exacto-mundo. Immaterial form the real economic perspective, what with all the excess reserves.
BUT! WTF would Bennie the Red be doing? Drawing more ire of the Congress to even more closely control monetary policy, relinquish the mere residual images of Central Bank Independence?
How fitting, carrying further, the abdication of monetary policy to the politicians. No conspiracy theory here, it's Real!
Forget about excess reserves. I read where Bernanke wants to end any and all reserve requirements for banks. It is past time to end Bernanke's reign and to close the FRB.
Dont worry..as long as its a rumor, its supposed to go up.
I'll believe Ben will hike rates, when he grows hair. Until then......
or when he grows a set of balls.
that ain't gonna happen either.
bernanke is a double phucknut.
Pop goes the weasel.
And for the hundredth time, the 1 year old child is delighted by the surprise appearance of the clown in the pop up toy. This is easy! It's like taking candy from a baby.
http://www.youtube.com/watch?v=sfYoNPJcN30
http://www.youtube.com/watch?v=c0tBk8_zcMA
http://www.youtube.com/watch?v=HzXI_ApY4dY
Yea but isn't this going to force the banks into lending. They have, until now, enjoyed a nice spread that created basically free money. Now that this spread is going to narrow they will be forced to lend won't they? They have to make up the lost "free" money don't they? They can't make it up on the prop desk. They have oer a trillion just sitting, waiting to be unleashed on the world. Hold onto your arss if they do start lending. Here comes the inflation Bens been wishing for.
Excellent point!
Jobs bill+Treasury QE+RSD prognosis=HyperInflation-Hollywood Futures Index=Inflation BIG
they will not be lending except to roll over underwater cre.
Lend to who? They can write mortgages and effectively sell them to Fed, and corporate entities can get paper. With the exception of people with exceptionally good credit, who are they going to lend to when they're trying to build up their reserves against massive CMBS and the next wave of ARM resets that are they couldn't get off their books?
I thought they were going to keep rates "exceptionally low" for an exceptionally long time period ...?
You didn't get the memo? Exceptional has been redefined to include what used to be average.
Didn't they already make their rate announcement earlier this week? If so, why would they come out 2 days later and change the rates? Am I missing something?
Discount rate is not the key rate. It's the interest rate banks get charged on emergency loans, which is why TD said it was irrelevant.
That's right. My bad.
No sir, you are correct. They will "lend", now.
Who they gonna lend to? People are scared out here...
The Fed is going to force Majors to lend to regionals. Regionals will take the money to increase reserves.
But they always announce both rate changes together.
Those reserves are there for one reason, and one reason only, to prevent bank runs by showing the public, "see we're not insolvent/flat broke, we have excess reserves!"
Wait. I thought that was to purpose of Repo 105.
Damnit now I'm getting confused. I just don't have a good head for finacial fraud I guess.
LOL
Actually you highlight the principal problem with any type of criminality being understood by the public at large. However, often the complexity of the crime is just the excuse for not understanding. What's most troubling for many is understanding the mentality. The average person expects others to see the world as they do. More to the point, most people can only see the world through their own eyes, lacking the capacity for deeper empathy, by which I don't mean compassion, but rather "put his shoes on and walk a mile" empathy.
For people who are basically honest, it's very difficult for them to understand the criminal mind, the ethical lapses, the brutality, the destruction, the wholesale harm done to others. This is why so many people look for excuses to explain away bad behaviour, particularly when it comes from politicians or so called "celebrities", who are supposed to be social leaders, at least in the minds of those who don't understand themselves very well if at all.
Common refrains such as "How can they look in the mirror" or "How do they even go to church after ....?" perfectly illustrate this confusion. This puts the average person at a distinct disadvantage when they're in the presence of a criminal (and about to be taken to the cleaners, to use that wonderful phrase) particularly the so called "white collar" criminal. The total lack of empathy (now I mean compassion) for the victims by the criminal is often the most shocking aspect of the crime to the average person.
This is true regardless of whether it is Madoff or Robert DeNiro "do you see me doing thrill seeking liquor store hold ups with a "born to loose" tattoo on my chest?"
http://www.youtube.com/watch?v=cYSzx_zy-98&feature=fvst
Excellent analysis, CD.
And people who are honest are the #1 marks for the sociopaths.....a favored prey. Why do you think the cons hang out in the churches ...?? Cause that's where the easy marks hang out. It's sad that a previous, now aged, generation enjoyed an era when the majority was populated by people who broadly valued morals and truth......only to live long enough to see the population of con artists multiply substantially.
It's not that they haven't been around in the past....there are now proportionately far more. Like a damn virus spreading.
[Like a damn virus spreading]
That's what rampant moral hazard looks like.
Easy to fix really. Time to roll out the guillotines.
c
i just want to point something out: MTB.
this thing is ridiculously valued, over 3x TBV, is under-reserved, and under-capitalized, and has to still pay back TARP, and Allied-Irish owns 24% of the equity, and they are on their death-bed in dire need of capital. Everyone of its peers is being hammered today, but this is positive.
A quick check shows Goldman has traded the most shares by a good margin. Who wants to bet that MTB is going to come to market soon with a secondary. Who then wants to bet that GS is the sole bookrunner? Who further wants to bet that GS is pushing the stock up right now in anticipation of it, factoring in the Buffett link?
I just wanted to have this on the tape so we can see what happens.
OSO, I do not think I would bet against you. This case, or otherwise.
MTB same meme as wfc re "good management". Throw in PNC, USB, BBT, BOH..........rinse wash repeat
Who further wants to bet that GS is pushing the stock up right now in anticipation of it, factoring in the Buffett link?
gotta be GS with Buffett's ownership in MTB.
I don't follow them closely but their main market is where i reside in upstate NY, which has been dead for years.
Silly Rabbit. Tricks are for Feds.
If they were really going to goose the discount rate, it will be done after hours today or just before the market open tomorrow, in order to screw the index option holders again. Remember last time? Remember August 17, 2007? September 18, 2007?
The rumour really put a bid under the USD and dropped the EUR over 75 pips. In any case, I would suggest squaring or hedging positions - because if there is even a glimmer of truth to the rumour, it will come after hours or early in the AM.
That's how the FED marches the day before OPEX. Never forget - just look at who is on the other side and losing BIG on the trade - if it's GS or JPM, then something will be done.
Exactly.
The fact that we're hearing the rumor convinces me it's highly unlikely. If it were really going to happen, we'd be the last to know.
The only paths to inflation that I can see are: (1) War in Iran; (2) Federal bailout of the 50 states.
I think there is one more possibility. Financial shenanigans and the suppression of commodity prices to give the impression of a strong dollar have reduced the future supply of goods. I think there is a good chance of a shortage of needed goods due to this disaster capitalism.
How about Social Security staying cash-flow negative?
How about if the Fed reduces the reserve requirements for the banks? Instantly multiplying the Tier 1? Didn't Japan just do this yesterday, effectively creating 10 trillion yen overnight?
How about if foreigners change their bond allocations and become sellers?
...
Not arguing that we won't go through another bout of deflation. We very likely will. But the ingredients for inflation are pervasive.
They can create all the reserves they want but there is no way to get those reserves chasing goods and services yet.
For inflation or hyperinflation to hit there has to be massive Gov't spending. So I'm thinking along the lines of "what can the Government buy that is realllly expensive?" Healthcare comes to mind.
If bank leverage requirements are changed, a bank may be allowed to leverage at 8:1 instead of say 5:1. This extra buying power would pour into bonds, allowing existing holders to cash out while the overall market capitalization remains steady. This would indirectly transfer the funds of the increased leverage into the hands of end-users. Am I missing something? Is that not what Japan just did?
Also, with regard to the government having to spend to create inflation. The problem is, they already have spent. The holders of our debt (China / Japan) have taken credits and put them in a black box. Those credits were never redeemed for goods. At any time, we could face well over a trillion dollars in redemptions of paper for goods. Its all up to how our creditors feel.
And with the current situation in Social Security / Medicare, increased spending by our government is a guarantee. The only question is, will it be a large increase in spending, or a gigantic increase?
Cheers
You, sir, lack imagination.
(3) Chinese dump treasuries (or don't roll them over) as retribution for US taunting.
(4) China, India, the Saudis, or some other nation starts buying gold on the open market using dollars
(5) The Saudis stop trading oil in dollars.
(6) The COMEX goes bust
(7) Bullion banks are forced to close their short positions in metals
Etc. etc. The list goes on and on. We are sitting a gigantic tank of explosives with 100,000 moving parts built by the lowest bidder, bidders who have since gone bankrupt due to lawsuits from shoddy workmanship. Don't think for a minute that there aren't a hundred things out there that could trigger a run on the dollar and send us into chaos overnight. That kind of thinking will leave you seriously lacking in preparation. And in the coming era, lack of preparation will certainly leave you destitute, and possibly dead.
+1
Last time they raised the discount rate the day before OpEx. Could we see the same shenanigans again?
Depends on whether the squid's trading book would benefit from such a move. If so, Ben will oblige. If not, fuggetaboutit.
Who are the banks going to loan to? Defaults will continue to increase; they know as much; so unless a new bailout is put into play to back new lending... on second thought, maybe banks will be lending after all.
These meaningless rate hikes have more to do with instilling creditors with confidence to buy more treasuries. But can China really be that stupid or misinformed?
I think the Majors will lend to the regionals, then they in turn will lend. I know that this theory does not have adequate terms, but we are living in some weird sci-fi version of America, and I think we will see loans for everything from houses and cars to loans for ipads and tampons. In my opinion, the Fed, and the US government, want to officially kill the doelarr (it is dead and buried, trust me), then blame China. I know, I know, there is no logic that justifies why on earth they would make loans (other than to incease monies with their "Made Off" fractional reserve lending scheme), but let us remember who we are dealing with. BS uses anti-logic...I was so glad he walked into Paul's trap! "You must be a gold standard guy..." WOOPS!
PS, China is not "buying" anymore, unless it is through UnGreat Britain or a CIA run hedge fund.
Well I found myself straying from my original projection of slow grinding deflation. But I just can't stray far. There is no doubt that the loan that provides the economy (as a whole) with the biggest bang for the loan is the construction loan.
Speaking as a home builder, I just don't see this happening due to the overcapacity that exists in housing and I can't see any demand for commercial construction. Where in the economy could there be any legitimate loan demand that would produce economic growth to the scale that would have a real and positive impact on the economy? There just isn't any. I guess the llama, ostrich, and opaka business could make a come back.
There is just to much commercial and consumer debt that has to be repaid or defaulted on. There is also a big restructuring of Americas municipalities that must happen and is unavoidable. This isn't so much of a debt issue as it is a restructuring issue. Then the National debt must be brought under control. The muni and National adjustments could take years and years due to the political pussies that are currently in office. Let's hope that more Governor Christies are elected.
So I remain in the deflation camp.
Overcapacity in:
Housing
Office
Retail
Specialty
I would look for a government contract if I were still in construction.
Gov't delays their payments 6+ months. Cash flow problems. And no lending to cover the gap. Oh, and now I'll have to pay 10% more for healthcare obligations. Now I'm making no profit at all.
Screw it. I'm retiring.
cheap euros, buy em while u can!
Printing press at full speed ahead.
Let me guess, float a rumor about a discount rate rise day before OE. Don't raise rate, index blasts off tomorrow morning.
Fine, but what I want to know is how the hell did the VIX not only break the low (17), but how is it staying under? It will get pushed up soon, DJ to lose 100-200 points soon...maybe not tomorrow, but soon.
Next week, my guess.
.....health insurance companies leading the charge down ??
I still don't have the balls to short against the invisible hand.....no matter the HCR outcome. Not yet. But phony crazed valuations are pressing up on a ceiling.
Very conservative estimate. Soon, we'll wake up to "throw away bids".
Let the sales begin!
That makes sense.
Don't come to the window anymore.
Just don't come to the window ok?
Here we go again, pretending we're in control of something.
And just like clockwork they try to push the dow through todays high at 3:30...should lead to yet another massive whatever to close above whatever todays mark is...as hard as they try the SPX just does not want to budge today...someone must have taken the gerbil off the wheel over there. Better get that computer running again...might take two gerbils this time.
Can't seem to get a handle on today's market action. Feels more than mixed. Perhaps undecided and at crossroads. Just one push over the side and .....
I've gotten sort of used to dull...but this is eerily dull today. And I think that is the same whether you want it to go up or down.
Calm before the storm(s)
The Perfect Storm.
Undecided in the afternoon over the rate hike rumor. Is it coming, or not, or is, or not, or is.......or not. 4pm....let's see what happens after hours or tomorrow. Still think upward bias Friday, mild selloff Monday.
And how funny would it be if the index just stayed right here through OE...right between 1150 and 1175 but not at (or even touching lately) either level. I can remember and OE week this dead in a quite some time.
There's no rhyme or reason for this thing to be where it is. Perhaps end of this month is the biggest test we'll see of how the system handles a major player (FED and MBS buying etc) removed from the market. It's so obvious that I'm sure they'll draw us in and ramp it further up. It just feels as if something very bad is about to happen but can't decide if it's either terror activity, a failure we don't know about, a new sovereign thing, the HC bill. Just kinda thinkin somethin's up and it smokes this thing harder than anyone might think. It'll trap to "buy on dippers" and they'll keep whackin' it!
I would agree with that...though I would probably have agreed for about 374 days and so far have been a bit early on that outcome. However, today did feel strange particularly with OE. It certainly could keep going up, but I just can't imagine what happens if it starts to go down, just doesn't seem to be anything here to hold it. But maybe everyone is just resting up and shaking off a post St. Patrick's day hangover.
The advance decline seems a little off to me. Almost like there are a few people subtly leaving the theatre as the first whiff of smoke competes with the popcorn.
The January decline was immediately accompanied by overwhelming bearishness and the post mortem leads one to conclude that this was one of the more obvious signs that the decline was not the real deal P3 or whatever the crash afficianados call it. Now this time around all I hear are bears talking about a decline they can use to cover shorts and retreat back into their caves while bulls can see nothing but blue sky.
For a decline to get off the ground it has to develop in skepticism I think. So check for the bulls who are becoming hubristic and complacent in extremis and simply cannot envision any meaningful drop (I mean we already got that over with in January right?). Check for the bears too if they cover after a 50 point drop and discover it is just a way station to a destination much farther south, thereby throwing a spanner into their resignation that the next stop is SPX1230. The bear sour grapes + the bulls arrogant dismissal would, I think, create just the right skeptical environment for this thing to start unwinding and break all the supports so many have resigned themselves to being inviolable.
I do not see a crash like October 2008 and March 2009 unfolding but that doesn't mean the market could not still end up going much, much lower.
Bloomberg reports the rumour originated in Chicago.
Oh yeah, options expiration.
Fed pursuing same crack pot interest rate policy as in 2003 and the outcome will be the same except this time we are already 3 trillion dollars more in debt.
Huge story on Bloomberg. The Build (Bilk) America Muni Bonds are subject to offsets! Cali borrowed over $8 billion thru this program and the interest subsidy won't be coming if the state owes the Feds! So much for stimulating the economy!
To add further insult to irrelevance, they should also announce that they are doing some multi-trillion intraday liquidity drainages to test the banking system, each time in the amount of a couple of trillion dollars and for a duration of a time range of 15-30 minutes. (The reason for a time range, of course, is to encourage creativity among staffers -- after all, central banking is an art)
This crisis has forced me to realize that the welfare state is merely a mechanism for personalizing the profits (of hiring only competent employees during good times and firing them in the bad) while socializing the costs of maintaining the rest of the population onto the backs of those employees without them realizing it.
So elegantly simple!!
Fiat currency regimes are merely a means of concealing the ever escalating socialized costs with infation, thereby misleading the competent population into thinking they benefit from the system.
Again, elegantly simple
Devilishly so. Worst part is most active facilitators in this fraud are not even aware that they are participants. They just think they are really, really smart to earn all that easy money...
Greece bailout hits the shitter.... massive long opportunity. Rates to rise... economy must be swell, let's buy more stocks. Argentina about to default? GREAT!! Finally they will need to borrow more. Get me a triple levered bull index on that.
Ridiculous... The market is actually trending exponentially at this point. Bernaneke needs to remember that prices are only prices if people believe in them... ask Mugabe
When is the Fed cabal going to lose credibility ??? raise the discount rate ,,,,maybe blah , blah, blah..........
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