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The Fed Cannot Move Without a Crisis… And One is Coming
Well the Fed disappointed as I stated it would. How anyone could be surprised by this is beyond me. The Fed was admitting that the consequences of QE rendered it less “attractive” as an option as far back as May 2011.
Moreover, the last six months have shown the Fed to be relying heavily on verbal intervention rather than direct monetary intervention. Every FOMC meeting (and any time the market takes a dive) some Fed official steps forward and promises that the Fed stands ready to help if needed.
The reasons for this are three fold:
1)
Why bother with monetary intervention when you can get the same effect from verbal intervention?
2)
The Fed is too politically toxic now to simply unveil a massive new monetary scheme without a Crisis hitting first.
3)
The Fed is well aware of the consequences of QE (higher food and gas prices) and while it focuses on CPI as the measure of inflation, the political pressure engendered by higher costs of living are certainly on the Fed’s radar.
In plain terms, the bar for more QE is set much, much higher than the vast majority of analysts realize. The reason is that the Fed can no longer simply prime up the printing presses if the economy takes a dip.
We’ve seen this clearly in the last two Fed FOMC statements, in which the Fed downgraded its view of the US economy to posting “modest growth” (Fed speak for next to none) and then offered a “highly accommodative stance,” (Fed speak for “we’re out of ideas but can always hit the ‘print’ button”) as way of dealing with this.
Let’s cut the BS here. The Fed has maintained a more than highly accommodative stance for three years now and U-16 unemployment, food stamp usage, home prices, and virtually every other economic metric indicate that they’ve done little to boost the US economy in any meaningful way. QE has and always will be about boosting asset prices in the hope that the Fed can stimulate a recovery by getting the S&P 500 to some level.
The only problem with this is that people don’t engage in financial speculation to pay their bills. Incomes have and always will be the single most important metric for gauging consumer strength. And as the below chart from Morgan Stanley shows, the Fed’s policies of the last few years have done nothing to boost incomes (unless you work on Wall Street).
This chart goes a long way towards explaining the current political environment in which the Fed is about as popular as the bubonic plague. If you read headlines stating “Fed Gave Trillions to Banks” and you’ve been laid off and are living off food stamps, your blood pressure might tend to rise.
And you might tend to vote based on that.
Folks, the reality is that the Fed’s hands are tied. That’s why they keep issuing these innocuous policies (keeping interest rates low until 5056 or some insane future date) without actually doing anything. They know that additional easing means inflation soaring, which makes the Fed that much more a target of popular outrage.
So if you’re counting on the Fed propping the market up throughout 2012 as it did in 2011, you may be in for a rude awakening in the coming months. Every day that we get closer to the 2012 Presidential election, the bar for more QE goes higher and higher. Truly unless we get some kind of major Crisis, the Fed won’t be doing much of anything.
So let the traders run their “end of the month” games this week. But don’t be surprised if stocks start to take a dive in early February.
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And because you are so fucking brilliant you not only have everything figured out but you get payday loans as well!
Things must be slow at Media Matters today. So, these people in poverty, they have flat screens and cars, cell phones and ear rings and cash for dope. So, rather than being in poverty, they are actually in a state lesser luxuries than those who work.
After 50 years of the WAR ON POVERTY and trillions of dollars, why can't the Progressives admit its a failure? Or is it just a huge vote buying scheme? And allowing people to have "No Skin in the Game" makes electing lying, no-nothing socialists like Braack a lot easier, don't it? What's it like being the tool of a Nazi Collaborator?
A government which robs Peter to pay Paul can always depend on the support of Paul.
- George Bernard Shaw
“All propaganda has to be popular and has to accommodate itself to the comprehension of the least intelligent of those whom it seeks to reach.”
-Der Fuhrer
“AMERICA WILL BE THE EASIEST OF ALL NATIONS TO CONQUER. DIVIDED AGAINST HERSELF, THE UNITED STATES WILL OFFER LITTLE OPPOSITION TO OUR IDEOLOGY WHEN THE HOUR TO STRIKE HAS COME.”
-DR. JOSEPH GOEBBELS
REICHMINISTER OF PROPAGANDA
Your post is fake. You are fake. You are another paid troll.
Ron Paul is hugely popular. The TV says bad things about him because he is poison for your TV. He can win.
But most importantly, your story is a lie and you are fake.
Gingrich had 41 percent of the vote, followed by Romney with 27 percent, with 95 percent of the precincts reporting, according to the AP.
Former Senator Rick Santorum of Pennsylvania had 17 percent and U.S. Representative Ron Paul of Texas had 13 percent.
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Asshole, how many times do you have to be told that it is not OK to launch personal attacks on people just because you disagree with them? And YOU like Ron Paul, I like Ron Paul, but if coming in fourth with 13% of the vote is your definition of HUGELY popular, then I am not surprised you still think he can win, Ross Perot ran an insurgent campaign as well and got 20% of the vote and was also popular. Will Paul be seen to have purchased some influence in the convention? Perhaps, but the media and most of the GOP establishment feel they have safely relegated his candidacy to the lunatic fringe once and for all, that does not mean I think he is mad not that you see him as barking, just that he presented a serious threat to TPTB and they dealt with him. Move on.
@boiltherich
I lost you after "asshole."
Anyways you're right, ad hominem is uncool, and you are right to call me on it. The exception is when the guy deserves it. Just kidding. Anyways I don't understand the rest of your post, but whatever.
The Fed has not stopped printing for crying outloud. They are just not announcing it as QE. You can't say we are setting interest rates and keep them at that target without intervention.
What's the point in taxation if the Fed can just print money for the government? I dont know if I should add a /sarc tag....
to controll and opress people - and they can always put you in jail for tax evasion - look up Al Capone
LB, you are certainly correct and the fed as well as the political establishment will rue the day Bernanke set an inflation target for the first time. By the way, I miss your old avatar. Carnac ain't half as magnificent as your old photo.
What happens to the inflation target when Iran goes apeshit and does something stupid, oil goes to $250 and we have odd even rationing again? An automatic rate increase? Let's face it, our elected government is spending I do not even know how many trillions per year now, and the fed is spending at least a trillion per year on banksters. Accounting rules are a joke, nobody is enforcing any laws that do not pertain to prevention of class warfare, economic and finance blogs and forums are now worth just about as much as the paper in our wallets. ZIRP.
Now just a last thought before signing off this evening, the fed used to have one mandate but because it was better for the super rich and banksters they subdivided that mandate into two; maximum employment with stable prices. This week they have laid down the law on stable prices with the inflation target, and I guess that is good because if you are a rich guy or even just one of the few left working you sure do not want hyperinflation wiping out your assets do you? But, I wonder, could they not have picked an employment firewall instead? With an inflation target there will be lots of debt issued and rebought, lots of bankers will make a killing, and when prices rise as they must with all the hot money out there the fed will hit the breaks on the economy even though we are by any sensible argument still in a recession/depression.
The assumption is that the FED is doing things for the economy is false. The first priority of any organization is the continued survival and growth of that organization. Everything that the FED has been doing is for the survival of the current ownership of the FED, not you and me.
there's some hidden wisdom in this. like putting a rocket into space, you have to hit certain abstract targets, and the political targets were YOY stock market gains, the SOTU, and assorted employment numbers. THE WINDOW HAS CLOSED. MOST VOTERS HAVE MADE UP THEIR MIND.
the rest is psycho drama. the market likes the status quo. Obama rises above it, the election is pretty much over, and the only October surprise is a last ditch desperation move which at this point isn't a likely consequence. after the election a whole new set of priorities will emerge. stay tuned.
Ok dumbass I won't be surprised if your wrong again.
Maybe you should give more shortterm advise... Like a week or a couple of days. Then maybe you may learn a little more trading skills. Just saying....
Maybe, you should spell advice A_D_V_I_C_E, dumbass, or learn the use of commas.
Editor Marty, you missed "shorterm," this should be "short-term." Also missed "your," should be "you're."
also, I don't think word advise has the letter _ in it
I'd like to buy a vowel?
it's remarkable: we all have spellcheckers but many of us don't use them (out of choice)
but there's a whole group of web 'volunteers' who go around spellchecking voluntarily (ie. uninvited)
Not to mention that it is not OK to call people dumb asses unless they posted a personal attack. For people that claim to know so much there is a distinct lack of manners here by a few people.
Thats all well and good. But you have been preaching this for months while the markets have gone against you quite definitively
He's decided to renew the "Surviving a Crisis Four Times Worse Than 2008" hook, which is fun.
Summers Super-Glued himself to the prediction that the Fed CANNOT implement more QE. Surprise, Graham! The Fed NEVER STOPPED targeting the quantity of money. Since QE Lite ended, they've already pumped well over $100 billion of new dollar credits into Europe, and they stand behind the €500 billion LTRO, and the next one, too. What's that? The dollar swaps are "sterilized" by EUR swap collateral? Don't make me laugh; you can't sterilize new vapor dollars with new vapor euros. It all adds to money supply.
The only thing the Fed has stopped doing is announcing ongoing monetizations. Things are so bad that the Fed just announced they will be "adjusting" their balance sheet to support the economy. Here's the tough question: To counter the forces of deflation, will the Fed need to shrink their balance sheet, or EXPAND it?
Hint for Graham: All central bank balance sheets are currently expanding. When you're wrong, the smartest thing to do is to admit it quickly and change course.
Depends on how your invested. The 30 year zero coupon strip returned 53% in 2011. Pretty much killed every other investment out there.
What will the face value of that bond really be worth in 30 years?