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Bob Eisenbeis: Just When You Think It Can’t Get Any Worse…
Bob Eisenbeis is Cumberland’s Vice Chairman & Chief Monetary Economist. Prior to joining Cumberland Advisors he was the Executive Vice President and Director of Research at the Federal Reserve Bank of Atlanta. Bob is presently a member of the U.S. Shadow Financial Regulatory Committee and the Financial Economist Roundtable. His bio is found at www.cumber.com. -- Chris
Since the FOMC’s June 22nd meeting, markets have been in turmoil. Commentators and Fed watchers have been speculating about exactly what Chairman Bernanke was trying to say on behalf of the Committee. When I commented shortly after the meeting, an astute reader pointed out that I had incorrectly reported that Chairman Bernanke had indicated the asset purchase program might begin to be phased out when unemployment reached 7%. In fact, he indicated that by the time the program had ceased, unemployment would be at 7% sometime in the middle of next year. The import of this remark is critical, especially given that the publicly available FOMC central tendency forecast for unemployment by the end 2013 is 7.2-7.3% and by the end of 2014 the central tendency is an optimistic 6.5-6.8%. If the Chairman meant what he said on behalf of the Committee and its forecasts are realized, then the entire phase out of the asset purchase program would be completed by mid-2014. Hence, the inference markets drew was that the FOMC is poised to begin very soon. This possibility is what riled markets.
But not so quickly! It seems that not all FOMC participants see things the way the Chairman reported. We know St. Louis Federal Reserve Bank President James Bullard went on record saying that he thought the discussion of the phase out was “ill-timed.” Because of his concerns about deflation, he would prefer to retain monetary ease for some time, and this includes the asset purchase program. But now other voices have been added to the chorus. President Narayana Kocherlakota of Federal Reserve Bank of Minneapolis stated in in a press interview and in a document on the Bank’s website that he would prefer to consider starting the phase out of the program using 7% unemployment as a trigger not the end point. He attempted to redirect the public’s focus away from the asset purchase program, which he and the Committee apparently view as a relatively small and quantitatively insignificant component of its accommodative policy. While this view of the policy may be the Committee’s perception, it clearly doesn’t reflect the view of market participants.
So what is the Committee’s decision as to when the phase out will begin, and how long will the phase out process last? What is the trigger? Is there even a trigger? Whom should one listen to? Following Bullard's and Kocherlakota’s statements, numerous FOMC participants have offered their own clarifications, all of which look remarkably coordinated, with a Roseanne Roseannadanna-like message: “Never mind.” Meaning, “We aren’t going to change the Funds rate anytime soon.”
What we have witnessed is a remarkable miscalculation on the part of the FOMC in terms of their communications strategy and forward rate guidance. Their messaging reflects an under-appreciation of what constitutes information meaningful to markets. Telling markets that a policy move depends upon incoming data is neither informative nor is it forward guidance.
What markets want to know are the answers to two questions:1) what incoming data will be used to make decisions and 2) how will policy depend upon those incoming data? For example, does the decision rest on reaching a critical value in the unemployment rate, the participation rate, or some other trigger? If it rests on the unemployment rate, then what does the Committee view as the most likely path for the unemployment rate to hit the critical trigger? Annual forecasts such as those released after the last meeting are largely meaningless, especially since there is an apparent disconnect, at least to this writer, between the projected path for GDP growth on the one hand and estimates for job creation and unemployment on the other. Growth would have to be accelerating greatly by the end of 2013 to come close to hitting the FOMC’s optimistic unemployment forecasts for 2014. Yet there is a dearth of evidence supporting that view.
Markets are like math teachers, they don't just care about answers. They also want to see the work that led to the answers to ensure that the reasoning makes sense and everything adds up. Ultimately, they need actionable information. Anchoring the Committee’s communications efforts in more detailed forecasts would greatly improve things.
Markets fret for data-driven answers to the kinds of questions that drive investment decisions and their timing, and they will not be satisfied with fuzzy answers, especially fuzzy answers that don't add up. For instance, how does the Committee expect to respond to changes in an indicator variable like the unemployment rate? Does it expect to cut back Treasury purchases by $5 billion for every 0.1 percentage point improvement in the unemployment rate? Or perhaps the Committee has some other calibration in mind?
If it doesn’t have such a plan in place, then it shouldn’t say “it depends on incoming data.”
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http://finance.fortune.cnn.com/2011/02/01/bernankes-biggest-blunders/
http://finance.fortune.cnn.com/2011/02/01/bernankes-biggest-blunders/
I am not surprized.....and the market surely knows this....it was so obvious to even the casual observer.... but the koolaide drinkers are still among us....
I smell a serious "come to Jesus" moment .........coming our way.
http://finance.fortune.cnn.com/2011/02/01/bernankes-biggest-blunders/
This of no surprize to me, and many others....Bernanke doesn't have a clue how this is going to end, and if you look at the link I provided, it shows just how many times he was out to lunch during his tenure at the FEd as chairman. He never ran a real business, or worked in the real world....so he only knows what BS princton was peddling when he went there.
We are so fucking screwed.....
This article actually suggests that fed actions need to make sense. Why in the wold would they start now? If it made any sense they would start by confessing that the whole thing is just one big ponzi scheme.
i thought bernanke said he didn't want to tie his decision on taper to data, because data (esp employment) is volatile and unreliable. the fed would never announce triggers, because it breaks thier hierarchial method of information distribution, they don't want retail investors gaming their actions. democracy is the same a bank run in fed terms, which is why they used veiled directives. the system has to fail. it has no choice
CRIME/TERROR/WEAPONS Bank in South America...
The outfit in question is Banco Paulista and its controlled subsidiary broker/dealer SOCOPA.
This little bank, owned by a very traditional "Paulistano" family (the Vidigal family) has turned itself into the go to bank for money laundering, black market currency, corrupt politicians accounts, etc.
They are even taking deposits (turned into cash usually within 48 hours) from known terrorist groups, known drug dealers, arms dealers, pirated/contraband goods dealers, etc.
± USD 400 Million per month comes from the triple frontier of Brazil/Paraguay/Argentina and into Banco Paulista in Sao Paulo. From there, they cash this money on a weekly basis and deliver it to the owners "Casas de Cambio" to keep on moving. The bank is charging between 3% and 5% to cash out moneys and 20% to launder moneys.
The Bank also charges a 3% flat feet to accept hard cash deposits of any source.
Now the real deal is the black market currency exchange (known in Brazil as Doleiros).
The bank uses its license to purchase official US Dollars from the Brazilian Central Bank (to the tune of US$ 10 million per day) therefore at official exchange rates and than sells the same dollars in the black market (via fraudulent forex contracts). The focal point of distribution for the hard cash (both dollars and reais) is SOCOPA's main office at Rua Funchal, 129 - 5º floor in Sao Paulo, Brazil.
The person in charge of handing the cash over there is Mrs. Maria Jose
There are 7 main "culprits" in this criminal activity:
Alvaro Augusto Vidigal
Alvaro Augusto de Freitas Vidigal
Marcelo Pereira
Tarcísio Rodrigues
Nilma Kodama (previously involved in financial/criminal scandals)
Antanos Nour Eddine Nasrallah (known drug/arms dealer along with brothers link to hezbollah)
Hwu Su Chi Law
Flavio Guimaraes (ex. Socimer Bank/Andres Group)
There are several companies involved:
Industrias Mangotex Ltda.
Esclimont Participacoes S/C
SOCOPA
If one keeps an eye out on any regular day, they will see politicians, businessmen, regular people, criminals, etc., all going into SOCOPA to get their packets of cash.
The authorities in Sao Paulo don't care or at least pretend the issue does not exist and the local media is nowadays almost like in Venezuela (no reports involving politicians).
If this gets the media it deserves, it has the power to bring down some top figures in the Financial World of Brazil and also some heavyweights from the political arena as well. Let's not forget known/wanted criminals.
This little bank is a true "Atomic Bomb."
#bcopaulista
#bancopaulista
#doleiros
#dolarblack
#lavagem
Banco Paulista e sua controlada e a corretora SOCOPA.
Este pequeno banco, de propriedade de uma família muito tradicional "Paulistana Quatrocentona" (a família Vidigal) transformou-se em um banco para lavagem de dinheiro, abastecimento de doleiros, e "mutretas" do PSDB em São Paulo.
Recebem dinheiro vivo e também TEDs (transformados em dinheiro geralmente dentro de 48 horas) de grupos de traficantes conhecidos, traficantes de armas, pirataria / contrabando de bens e até de grupos terroristas, etc. O PCC usa o banco para lavagem de grana e para saques milionários para compra de drogas.
± 400 milhões de dólares por mês, vem da tríplice fronteira do Brasil / Paraguai / Argentina direto para o Banco Paulista, em São Paulo. De lá, eles sacam o dinheiro semanalmente e entregam à vários doleiros para manter o mercado negro funcionando. O banco está cobrando entre 3% e 5% para sacar dinheiro e 20% para lavagem de dinheiro.
O Banco também cobra um fee de 3% para aceitar depósitos em dinheiro vivo de qualquer fonte. Sem perguntas, é só pagar!
Agora o grande negócio do banco é o dólar paralelo e os doleiros.
O banco utiliza sua licença para comprar dólares oficiais do Banco Central do Brasil (no valor de $ 10 milhões por dia), e vende os mesmos dólares no mercado negro (via contratos cambiais fraudulentos). O ponto focal de distribuição para o dinheiro vivo (dólares e reais) é o principal escritório da SOCOPA na Rua Funchal, 129 - 5 º andar, em São Paulo, Brasil.
A pessoa encarregada de entregar o dinheiro lá é a Sra. Maria José
Quando os volumes são grandes, eles entregam onde você indicar!
Há sete principais "culpados" nesta atividade criminosa:
Alvaro Augusto Vidigal
Alvaro Augusto de Freitas Vidigal
Marcelo Pereira
Tarcísio Rodrigues
Nilma Kodama (anteriormente envolvidos em escândalos financeiros / criminoso)
Antanos Nour Eddine Nasrallah (traficante conhecido / contrabandista de armas, juntamente com os irmãos)
Hwu Su Chi Law (Esposa de Law Kin Chon - contrabandista)
Existem outros envolvidos:
Lúcio Funaro (doleiro)
Flávio Guimarães (ex Banco Socimer)
Joseph Nour Eddine Nasrallah (foragido da justíça, traficante, membro de facção criminosa)
Se alguém fica de olho em qualquer dia da semana, vai ver políticos, empresários, pessoas comuns, criminosos, etc, tudo indo para SOCOPA para obter os seus pacotes de dinheiro ou uma vez por semana vários caminhões levando dinheiro para os doleiros.
As autoridades de São Paulo não se importam ou pelo menos fingem que o problema não existe e os meios de comunicação tradicionais, não relatam este crime diário!
Este pequeno banco é uma verdadeira "bomba atômica" e ameaça nossa vida diariamente ajudando os assassinos, traficantes, corruptos que assolam nossa nação.
"It depends on incoming data" means they don't have a plan.
"Baffle 'em with Bullshit" is their only plan, and bail out the bankers at all costs.
"We are perplexed at why interest are rising"
He admited they don't know what they are doing.Plus they have no plan/idea on what to do.
He does know Gov debt cost will be increasing with rates and Gov will become even more agressive to get the $$$.
the Fed has a very small bureaucracy. interestingly this wasn't always the case but "they downsized it anyways." that's a nice way of saying "you've put yourself at an informational disadvantage." there is so much to be gained from talking to actual people instead of proceeding in a "formulaic manner"...and yet that's how the Fed proceeds at the DC level. can't says as i know vis a vis the New York Fed. You would think all the principles would be present...but with Jamie Dimon now gong "how is one to know whether an internal devaluation isn't upon us?" excellent article...and the answer of course is that even in the information age we still find the Data being hidden from us. that does keep "it" from being devalued to zero. https://en.wikipedia.org/wiki/Data
The winners are picking their nose's and the losers are screaming for the deal.
It's easy... there will be inflation. If Bernanke and his band of short fingfered vulgarians have to print $2T / year, they will get inflation. They need to make money off of their owned debt.
MidEast, unemployment in US, everything is secondary to establishing inflation in order to profit from their held debt.
There has been inflation the whole time during the QE process. We just don't measure inflation correctly in the the CPI-or CPI-U. The stock market indices need to be counted also either each one individually or all as one and include net change in index value from prior to current CPI measurement. We don't count 'savings or investments' into the CPI only prices of goods and services. The economy also includes the stock market since technically the key component is the money supply and outlets it flows into should be considered in the CPI or some alternate measurement of CPI.
I'm confused. How does someone make money on "owned" debt through inflation? Doesn't inflation reduce the value of owned debt? Isn't the way to make money on debt to buy it during times of high interest and then drive interest down?
"Markets are like math teachers..."
Oh, horse shit! What passes for "markets" are casinos and high rollers. The biggest rollers are card counters, and they want to know what the dealer is doing with the decks. They could give a shit if it "make sense" or "adds up".
Here's the root error: "Anchoring the Committee’s communications efforts in more detailed forecasts would greatly improve things. Markets....will not be satisfied with fuzzy answers"
That isn't how the Fed works. They've learned their lesson. Look at what happened when they pre-announced that "QE2 will end in June as scheduled."
They ended it in June and both stocks and commodities plunged for the next several months. They had to cobble together QE3 version 1.0 by October to get things turned around. The Fed will not give any more hard deadlines or straight answers. It's going to be one fuzzy equivocation after another, all in the interest of stalling for time....because THEY HAVE NO IDEA WHAT TO DO. Now they're just praying for a deus ex machina--maybe the Mayans were off by a year and the world will end this December. They don't have a plan and can never exit. Markets and the economy will stagnate together until the Fed announces the expansion of QE.
I wanted to say "horseshit" to the unfucking believeable 7% unemployment rate, which seems to be the basis for this article.
Chris- Friends don't let friends drink the koolade.
Yeah, just like the true 'inflation' (dollar debasement) rate is only 1.5%, or whatever speciously low figure Bernanke and the BLS are currently spouting.
Plan, what plan? We are just going to keep things fucked up until it cannot be repaired!
PS FUCK YOU Bernanke.
When your policy is "dependent" on a ficticious number made up out of thin air, it seems the whole arguement is a sham as well. Unless you really believe what the BLS tells you. And if you do, your opinions should be treated accordingly.