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Why The Fed's Upcoming Jackson Hole Economic Symposium Could Have Wide-Ranging Implications
As another leg down to the economy is starting to be telegraphed by even the official data set, particularly in unemployment, and housing, and with industrial production slowing down, Goldman is once again beating the QE 2 "non-lite" drums. As such, all eyes turn to this week's Jackson Hole Kansas City Fed Economic Symposium (the same Kansas City where the sole dissenter to the Fed's ZIRP "bubbles4eva" policy, Tom Hoenig, rules over rational thought with an iron fist, even as other Fed intellectual midgets scribble pre-paid papers describing how stable the economy of soon to be bankrupt countries is). As we pointed out in the days following Hatzius' reduction in GDP estimates, the Goldman strategist was hoping for a $1 trillion QE announcement. The Fed decided against it, and the market sold off. Which is why at this very public Fed venue (and last) before the September 21 FOMC meeting, many will be focused on Bernanke's speech to see if he will telegraph the purchases of even more securities, which as Hatzius highlighted before, could include more "exotic" credit, including private label MBS, munis and even corporates. As Sven Jari Stehn says, "it will be worth watching whether Fed Chairman Bernanke will comment in
his opening remarks on the recent data disappointments and/or the
ongoing debate on the appropriate stance of monetary policy." And nobody is more concerned than Angela Merkel - now that the EUR has finally started to dip once again to the delight of an insolvent Europe, Germany will do all it can to keep the USD on its upward trend, as the ECB would prove much harder to manipulate into another round of QE. Or maybe not - all it would take is for Greece to be declared bankrupt again. Which is why the next big geopolitical instability cycle may start off anew depending on the first few sentences uttered by Bernanke in the August 26-28 meeting. And finally something quite odd about this year's meeting - as Bloomberg's Scott Lanman points out, the head of the FRBNY's trading desk, better known as the PPT, Brian Sack, is not invited to this meeting for the first time. We will keep a close eye on this very peculiar regime change.
One thing is certain: the ever more clamorous disagreement between the uber-Hawk (Hoenig) and the uber-money printing advocate (Bullard) is about to reach new heights.
More from Goldman:
Industrial Activity Set to Slow…
On the face of it, the stronger-than-expected performance of industrial production in July was good news. Following a decline in June, overall production was up 1.0% on the month, with manufacturing rising 1.1%. Output of motor vehicles and parts—which rose 10%—made a sizable contribution to this increase. While GM’s decision to operate most of its plants during the usual shutdown period in July was partly responsible for this, our calculations suggest that the effect was small (worth around 0.1 percentage point). The key question is thus whether this welcome surprise in industrial production is sustainable.
This week’s manufacturing surveys suggest not. The Philadelphia Fed’s headline index fell sharply into negative territory in August, and indexes for both new orders and shipments declined from already low levels. While the headline Empire index rose slightly in August, new orders and shipments also fell sharply into the red. The new orders components thus point to substantial slowing in industrial activity going forward. In this vein we expect a roughly flat reading for next week’s durable goods orders ex transportation.
The one positive aspect of these manufacturing surveys was that the inventory indexes fell. This suggests that the moderation in activity is not just driven by slow demand but by efforts to control inventory accumulation. Consistent with this, actual inventory data in June—including manufacturing, wholesale and retail—have consistently fallen short of expectations. (Together with a larger-than-expected trade deficit, these underlie our forecast for a revision of second-quarter GDP growth to 1.1%.)
…While Initial Claims Hit a New 2010 High…
Meanwhile, Thursday’s claims for jobless benefits underscored the dire state of the labor market. Initial claims rose to 500,000 in the week of August 14—a level not seen since November 2009. Furthermore, the total number of people receiving jobless benefits—including those on extended/ emergency programs—rose back above 10 million, not far from its all-time high of 10.7 million set earlier in the year. Although special factors such as the discharge of temporary Census workers or the renewal of the lapsed extended/emergency programs may have contributed to the run-up in initial filings, we do not think these distortions fully explain the increase in recent weeks, as discussed in yesterday’s Daily Comment. If they do, then claims should revert quickly to lower levels in coming weeks, as both distortions fade. Thus, the next couple of reports will be particularly important.
…And Housing Continues To Languish
This week’s housing data were not much better. Although housing starts in July rose in line with the median expectation (+1.7%, mom), the report was disappointing in that its composition was weak (single-family starts fell), data for June were revised down, and permits declined. Meanwhile, the National Association of Home Builders reported that builder sentiment dropped one point further this month, to an index level of 13. This is one more piece of evidence that excess supply is hanging over this market, preventing sustained recovery from a level of production that looks basically frictional in nature. In this latest survey, the assessments of future sales were mainly responsible for the drop. Consistent with this bleak outlook for sales, we expect large declines in next week’s new and existing home sales (-5% and -25%, respectively).
The Fed Could Act
A number of economists—including Fed officials—will gather in Jackson Hole for the annual Kansas City Fed Economic Symposium next week. In particular, it will be worth watching whether Fed Chairman Bernanke will comment in his opening remarks on the recent data disappointments and/or the ongoing debate on the appropriate stance of monetary policy.
Two themes have dominated Fed officials’ remarks on this debate in recent weeks. First, a number of regional presidents, most recently including Minneapolis Fed president Kocherlakota, voiced concern that the Fed’s current low interest-rate policy risks leading to deflation. While we agree that there is a non-negligible risk of deflation, we attribute this to the enormous amount of slack in the economy rather than the Fed’s low interest rate policy (which we think should be continued until at least end 2011).
Second, St. Louis Fed president Bullard reaffirmed his view that additional Treasury purchases may be warranted "should economic developments suggest increased disinflation risk." Skeptics of this view point to the mixed market reaction to last week’s Federal Open Market Committee (FOMC) decision to keep the Fed’s balance sheet constant through additional purchases of Treasury securities, as both bond yields and equities have fallen since.
Our analysis this week suggests that the Fed’s unconventional policies have been effective in supporting the economy through easier financial conditions. Our estimates suggest that financial conditions are around 200 basis points easier with the Fed’s asset purchases and the "extended period" language. This accounts for roughly half of the 450 basis points easing in financial conditions seen since the peak of the crisis has been due to the Fed’s unconventional policies. Moreover, the bulk of the impact seems to stem from the asset purchase announcements.
Given the short history on which these estimates are based, they are necessarily approximate. Nevertheless, they imply that the Fed still has the ability to boost the economy through easier financial conditions, even with a near-zero fed funds rate. This conclusion reinforces our view that the Fed will opt for more stimulus should the data continue to disappoint.
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I am not sure that Merkel is happy that the dollar is on an upward trend. I thought that Germany was part of the Euro/BIS crew that wants to outlive the Dollar/FED.
So Cheeky Bastard really did call it quits eh ? Haven't seen him in a while
maybe its time for zerotrolls.com "subscription only"
But to outlive the dollar you have to crowd it out : much like Walmart selling goods at such skinny margins it puts smaller retailers in the neighbourhood out of business before they can control prices to their hearts desire (ie raise to inc margins when such times allow)
Beggar-thy-neighbour policies are going to intensify before the system is reset.
according to FOFOA, the BIS wants to destroy the dollar and the Euro was designed to do that.
No. 9:
and Milton Friedman knew that and said that the Euro won't stand. I'm with that Friedman (and Rose). Screw the other guy.
but it is a race to the bottom.
- Ned
the dollar won't stand, the ECB marks is gold to market every 3 months. The fed has their tungsten marked at $45
I'm not sold on FOFOA, but it's no great stretch of the imagination to suggest that top people in Germany (and France - probably especially France - remember the old /franc fort/?) dream of bestriding the world with their strong reserve currency. But when you have a fragile export-based economic recovery, a big budget deficit, shaky banks and so on then big dreams are for another day. Maybe there are some Bundesbank types who would be willing to pull a Montagu Norman and trash the German economy to pursue strategic strong-currency goals. But Merkel's got elections to win.
ZH's "foil" also seems to be on a bit of a hiatus...
cheeks and chindit my two most favorite, G O N E.
Cheeky's over in Europe somewhere... Kathy, I think you should make it your mission to go find him and convince him to come back. Start in England and make your way east - I am confident that you can do it! Spend every minute of everyday wandering the streets of Europe looking for him. It might take years but it will be well worth it. Good luck!
yeah, f u c k y o u , frank†
plus, i think he is dead.
babe, you need those bold letters to be the thin ones. 'y know?
yuck you
You can find him on Twitter. Prolific with the tweets.
H O W?
i don't know Twitter or R U being¿
Someone should fire a bunker buster into Jackson Hole. World peace should commence shortly there after.
No but if the CFR, Bilderbergers etc were also hit simultaneously, then we would have world peace and a new morning in America.
Glad to hear you mention the Bilderberger bums and the CFR. I've often ended my comments here at ZH with "PS: 911 inside job." I'm trying to get other posters to join me to tick off the neocon warmongers and SPREAD THE TRUTH even at the risk of being hauled off to Gitmo by the DHS.
Interested?
PS: 911 Inside job
You for got the Trilateralists.
PS: 911 Inside job ---- with the direct help and assistance of Bill Clinton.
dude-hauled off to the tropical paradise of club gitmo? You'd put on like 40 pounds in club X-Ray. Speak any arabic? How's your right hand vs. your left hand?
Please let us all know.
- Ned
banker buster
Bankers love to meet in the high mountain area of Wyoming. They love the subtle innuendo of meeting and agreeing to be "in the HOLE". Afterall their whole scheme is to artificially stimulate the masses to produce while intermittantly, by dramatic and subtle moves, depriving them of their substance through printing and calculated market shocks. To shift an overwhelming amount of the wealth of this planet from the highly productive and effecient over to idle and idolatrous classes is their whole object and aim. Altogether an odious and detestable profession.
http://www.ft.com/cms/s/2/e13b361e-abe8-11df-bfa7-00144feabdc0.html
"The government could no longer issue sufficient notes – even with Havenstein’s lightening presses – to finance itself. Society started to break up. Farmers refused to sell their produce in return for what they called “Jew confetti” – an ominous portent for the future. Hungry townspeople went on raids into the countryside, slaughtering livestock, which they then carried off. More prosperous regions contemplated secession.
Fergusson shows how central to the social contract is trust in the soundness of money. Without it, the web of transactions upon which we all depend breaks down also. The result is total moral collapse."
I'm glad that the Allies defeated the Axis in the latest world war, and in doing so "saved the world for democracy". Or should we say plutocracy. It is telling that the confetti printers with the highest rank are Germans displaced millenia ago from Palestine who, again displaced, inhabit the capitals of England and colony. No homeland but where forgery of banknotes has been sanctioned through corruption. Now we enjoy the fruit of their labours within our own financial system. Like a sotted apple enjoys its riddling of worms.
And while they sup and dine upon the back-broken dreams and efforts in their Broke Back Mountain resort, they may need to tremble at the righteous indignation of the coming backlash or liberty-loving yeoman. And remember, in Jackson, of Jackson's wrath.
"Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves."
In a globe honeycombed with their intrigues and corruption, will there ever be another heimatsland in which to hide and fractional men rehatch fractional reserve while claiming high numerator, low denominator fractions of wealth? And will they go willingly or be dragged, hogtied--kicking and screaming to the eternal hole which is their final and just unresting place?
Jew confetti' once again .Coincidence, surely Bernanke will know the term
you started out so well. i'm very disappointed with your ending. i keep a copy of the last page of the Great Gatsby in my pocket which of course is the greatest written ending in the history of the English language. Perhaps you should try that?
Dow 11000 on Monday!!!
"as Bloomberg's Scott Lanman points out, the head of the FRBNY's trading desk, better known as the PPT, Brian Sack, is not invited to this meeting for the first time."
Me thinks this is because he will trading his ass off trying to hold up the bid less market when everyone figures out the Fed has lost control and confidence...even from fellow bankers?
+36,000
No doubt about it. He needs to be around to juice the futures just in case one of those morons says something stupid...again.
My position for several months now is that there's no foundation (volume) holding up the house (market). You now have have seasoned, well-heeled hedge fund managers throwing in the towel. If two actually did it, you can bet there's 200 that are thinking about it.
Its simple. The Fed prints more money, The stock market goes up. What the fuck is so hard to figure out? Now go home and get your fucking Shine Box
They're just busting our democratic balls.
Democratic Balls are CHIEFLY responsible for the exteded FUBAR we are in.
BHO's policies, and Agenda, have made sure of that.
ain't love grand.
Sure, the sole purpsoe of the Fed is to distribute cash to mega-banks.
Taking crap assets off their balance sheets, open front-running, asset bubbles. How long can this go on? QE does NOT help the economy (except for Wall & Broad, and Shanghai)
But guess what? GoldDamn likes that! GoldDamn wants it that way! And GoldDamn will get what it wants.
The QE has done nothing so far to help. It prolonged the depression. Would we rather have 18% U3 and 25% U-6 unemployment over 3 months and then start recovery, or 10% U-3, and 17% U-6 for 3 years? Most people CAN survive for 3-4 months w/out a job, they would not lose their house or their car. But the Fed chose the latter, 3-4 years of 10/17% malaise. In that timeframe very few long-term unemployed will survive financially.
Doing heckuva job, Ben!
What is needed is a sharp, quick and very painful retracement not jsut to the mean, but a significant "svershoot" to the other side in equities, and especially in RE. THe faster the fall - the faster the "smart money" will step in to buy undervalued RE. 300 million people will be better off in the long run, but 300 thousand overleavereged bankers, hedgies and PE shops won't. . THe Fed decided to crush 200+million middle class, to preserve the wealth of the ultra-high net worth crowd.
I agree with you - but since the Fed is PRIVATELY owned BY THE BANKS (yes, it's true), the Fed is just doing the bidding of its owners. I can't imagine why - well I guess I can - the US government has granted a monopoly power of credit/money creation to a private organization. So QE is just one more example of transferring wealth to the banks - in return for creating credit for free out of thin air, the Fed 'purchases' an interest bearing security paid for by the US taxpayers.
The Fed Gv't is ALLOWING the Fed to do what it could never do..............
Destroy the country.
Without a shot being fired.
i never thought they could even start this process. needless to say "it continues."
As another leg down to the economy is starting to be telegraphed by even the official data set
I'm glad it was put this way: All the talk of "Double Dipping" is actually an optimist's view. If we're in a depression (and some of us wholeheartedly believe we are) then we're talking about another cascading level down, without a recovery to its peak (as expected in a plain vanilla recession even with a double dip). Just like we're seeing now compared with 2007.
Call it "de-leveraging", post-bubble deflation, or whatever, the point is the same: we're not in a recession or even a "double dip" recession because that implies a cyclic recovery of the pre-recession peak, followed by expansion. We're in a Depression, a crumbling economy with a downward vector.
But expect no accommodation from the Fed until it's too late. Bernanke and the Fed governors spent an entire career studying how to short-circuit and prevent a depression by riding in on a white horse with the Fed cavalry and wagon trains full of "liquidity". After flinching and not really perceiving the magnitude of the crisis he got religion and deployed "The Plan". The black swan here is that 'The PLan" is ineffectual. Nobody in the hallowed halls of U. Chicago ever expected that one, and it will shock them. The response at that point is as uncertain and unpredictable as would be the response to aliens landing in Central Park. Prepare for growing malaise and anomie.
"We're in a Depression, a crumbling economy with a downward vector."
I really do not like your analysis because it seems to be both very pessimistic and very accurate.
"The black swan here is that 'The PLan" is ineffectual."
I hope somebody up there has at least a vague understanding about what's ahead for us and has at the very least a few baby steps of a plan mapped out that won't make things worse.
I hope somebody up there has at least a vague understanding about what's ahead for us and has at the very least a few baby steps of a plan
Well that would pre-suppose that they could consider for one moment that their world view might be wrong. That would mean that for at least a moment they don't consider themselves "Masters of the Universe", "Leaders of the Free World" and smarter than the previous bunch of academic economists and politicians who failed.
And that's on the likelihood scale of GOP not screaming for tax cuts or Dems not wanting stimulus. You see, we're still in a time period where dogma comes before all else. And clinging to dogma the hardest is rewarded by the electorate.
There's absolutely no doubt in my mind, we have been in a Depression, there's never been one damn SIGN of a recovery, and we are moving into part Deaux', of the worst clusterfxtrt, this country has ever seen.
I think I'd rather prepare for aliens landing in Central Park. At least that's something that I might be willing to believe is actually happening.
Or at least I might believe it if I don't see it happening live on TV.
I feel so immersed in lies anymore that I can't even buy into what I see in my own mirror.
"what's your vector, victor." "That's a roger, Roger." "That's an Ouvere, Under." Who? What? Huh?
There will be nothing substantial discussed at Jackson Hole.
What ever the plan of attack is, it has already been decided, and will be announced or implemented at the absolute worst time for the bears.
It will be the same old, same old schedule in Wyoming:
Early Morning:
Shit, shower, and shave
Late Morning:
Round of golf
Lunch:
Served by exotic, foreign beauties
Early Afternoon:
Play cards, watch SportsCenter
Late Afternoon:
Massage session provided by 17-year old Asian girls
Evening:
Dinner, drinks, more card playing
Late Evening:
Sex with your choice of escort, any race, color, stripe, or ethnic origin.
Sex with your choice of escort, any race, color, stripe, or ethnic origin.
You're implying little boys aren't on the menu?
You forgot the sheep, dogs, goats, and ducks!
Maybe one of them will thoughtlessly boink a black swan and send us off to the races.
thank gawd no pigs on the menu.
i like pigs myself
Escorts, boys, goats, whatever, I hope they will overdose on Viagra and wont be able to show-up in public for at least few weeks.
The bankers have more fun screwing taxpayers. And they don't need Viagra...the bankers are always up for raping the taxpayers.
well. let's not get carried away. in the meantime, "back at the Ranch."
RowBOat hi. do you know, i was in jackson hole during this convention four summers ago. guess what i did, hiked up to the top where the gondola loads, way high up i mean 4K vertical. took the last ride down on the old gondola. party gondola, huge. stupid they put a new one in, locals pissed. and a new restaurant and chair lift to no where for the rich people that don't know how to ski, can met their stupid husbands. talk about catering to the elite. makes you sick. the H O L E use to be the bad ass mountain. you can't ski you don't go to the H O L E. i was hiking for a while with this chick that told me about dick cheney living there and had a street named after him. i was thinking about moving up there until i heard this shit. then every hotel and restaurant has fucking bush and cheney photo's taken with the owners. i actually left right after playing golf on a public course. oh i met robert trent jones I or II ??? famous golf course designer, forget. he put white sand in the bunkers, which i thought was stupid, cause beach sand in the mountains, dumb.
File:Bridger-gondola-jackson-hole.jpg - Wikipedia, the free ...Obama's Chicago is a much cleaner and safer town than JH. If you get a chance take a hike around Detroit for a better understanding of what the DNC wishes for the Nation. Which liberal arts degree do you have?
ME?
Kathy, really go for it-Detroit wheels and all. - Ned
f u c k y o u too -dash- Ned head.
why the constant -dash- g a y†
so i've got a pair of boards waxed and clean just say the word.
U, could ski the H O L E ?
i don't really do any B I G mountain skiing any more.
but i didn't say
NEVER.
Thats f'ing hysterical. Ben Bernanke would benefit from a "happy ending" or two. That guy is so repressed he can't even jack off. This is what happens when Ivy League nerds run the economy. They're incapable of having sex so they fuck us.
Actually I've "heard it from the Grapevine" that they're "fully functional."
The wise William White recalls Jackson
Hole's meetings as the place where you
can debase the 'wackos' Central bankers
The Man nobody wanted to hear:
http://www.spiegel.de/international/business/0,1518,635051,00.html
Marching Towards a Yo-Yo Depression
It is really interesting how Goldman equates FED actions to economic prosperity when prior action show no justification. The theme being, the BHC ability to move bad debt to the FED, and the power to influence equities with even greater amounts of liquidity, is very beneficial to Goldman.
It must be nice to corner the market on FED asset purchases. Eliminate bad debt and collect fees, all in the name of bank profits.
----------
Over breakfast discussion focused on the mini MBS reinvest QE purpose as related to rates. Ben explain to me once again the program benefit for the country, when the effects are just front runned by the BHCs?
(Should front runned => front ran?)
Mark Beck
new word, sorry.
So where's the money?
Jackson's what???
w H O L E
you are a BAD girl....you are a girl, right?
old lady, really.
You guys aren't paying attention...
Bernanke and the White House are no longer on the same page. They may not even be reading from the same book.
carbon,
Do you think they EVER where on the same page?...personally I do not.
They have been polar opposites since day two.
Each has a different agenda.The WH is winning.
The "WH"?
The WH spends most days focused on concert promotion. Their Masters find this the best way to keep them occupied...
(no racial connotation intended)
"They have been polar opposites since day two"
That may well be the case but Bernanke gave them some running room with the first QE. The WH economic team had to deliver an improved economy not a rant for QE2.
Bernanke is no longer willing to sell the "improving economy" mantra.
Which means Jackson Hole is all about Plan B. The world's banks are going to have to decide how to deal with economies that aren't kickstarting....
Cartels fall apart because of self interest.
Absolutely, Ben can only help Timmy just so far.
There is a war going on, they are not one and the same.
Its just good business you know.
I am losing touch with the New World Order, and that can't be good. "Stragglers will be 'dealt with'."
But will an enlightened member of the NWO remind me what more plain vanilla QE will accomplish. I mean we already have a monster credit bubble. There is little yield anywhere. If the FED bought back all UST would it really matter?
I know there is a chance of going to Guantanamo Bay for this comment, but is the almighty FED "pushing on a string"?
Well Mr. Reese this is a VERY interesting question and indeed "you are a threat for asking it." Let me answer since "I've been dealt with already" unlike the folks yapping here. They're called "mo banker buddy." In short "my what i will term 'friends' in St Louis have informed me that if you don't give me QE 2 I am going to all the rest of you Federal Reserve Governors." Nothing personal of course.
Our analysis this week suggests that the Fed’s unconventional policies have been effective in supporting the economy through easier financial conditions.
Yep. They're doing a great job. Unemployment up, private sector jobs down, housing stats down, new home sales down, ECRI down, Philly FED survey down, Obama's job rating down.
If these clowns did any better, who knows? Maybe we'd really be in trouble.
indeed.
Maybe they should just meet in Baltimore or St. Louis and call it a day. Meeting in Jackson hole won't help them do the right thing nor will it attract a better class of attendees. It will only increase airfares.... for those few who fly commercial.
Couldn't they meet in El Paso, TX? Nice weather, secure environment.
oh, El Paso has some sweeeeeeeet spots.
or El Dorado. How's that for a sweet spot.
G O A W A Y
you have been following me, well for some time i am thinking.
"There are no nations. There are no peoples. There are no Russians. There are no Arabs. There are no third worlds. There is no West. There is only one holistic system of systems, one vast and immane, interwoven, interacting, multivariate, multinational dominion of dollars. Petro-dollars, electro-dollars, multi-dollars, reichmarks, rins, rubles, pounds, and shekels. It is the international system of currency which determines the totality of life on this planet. That is the natural order of things today. That is the atomic and subatomic and galactic structure of things today!"
holistic system
wholistic system.
I'm for world peace, too. I really am.
Thanks for such a great post and the review, I am totally impressed! Keep stuff like this coming!...
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