I had this to say last week:
The Fed could easily attempt to buy some market peace by issuing a statement that the policy of zero interest rates would be extended for a minimum period of one year. I consider this to be a “high probability" to happen in the next 30 days.
I got it right, but I got it completely wrong. I feared that the Fed could extend the ZIRP language for as long as a year. Not in my wildest dream did I think they could take the extremely risky move of guaranteeing that interest rates will remain at zero for another 24 months. Having been shocked, my thoughts.
*This action is indefensible on economic merits. This move is not motivated by sound monetary policy. It’s motivated by politics. This is a payback to Obama. Shame on the Fed for mixing politics with money.
*We will not go two years with this monetary policy without inflation (measured by core) exceeding the previously stated commitment by Bernanke that policy would not be allowed to rise above 2%. Bernanke and the dove members that signed onto this policy have lied to the American people. Bernanke has done it on 60 Minutes. He has done it to Congress. Shame on all of them.
*The Fed has taken away its ability to react to a situation that would require them to tighten. We are now on a one-way street. There is no way to turn around anymore. I believe the Fed has abdicated its responsibilities under the dual mandate. The have no ability to react if inflation should pop up in a year from now. Even worse, they have no policy options should there be a run on the dollar. The possibility of a run on the buck has gone up exponentially as a result. Should that happen, the Fed will have left us economically defenseless. Shame on the Fed for making us more vulnerable to a speculative attack.
*The stock market run up this afternoon is the Bernanke Put at work. Lets be clear on the consequences of Perpetual ZIRP. From this day onward every buy and hold investor who acquires Treasury debt with maturities of less than five-years is GUARANTEED TO LOSE MONEY. So if you accept that, then stocks have to look better. Shame on the Fed for debasing money and punishing savers.
*We have only one monetary policy. Juice stock multiples. This is the farthest thing from “Progressive” economics as you can get. We have a policy in place that is designed to make wealthy people wealthier. At some point there will be a social cost to this. The fires and riots in London were triggered by a shooting. Underneath is a rage between haves and have nots. Shame on the Fed for rigging the outcome for fat cats. Double shame on them for when our streets are filled with rage.
*Zero interest rates also means Zero risk. I think the change in Fed language will exacerbate recent short-term funding liquidity. I think we will see this appear (again) sooner versus later. I think Zero interest rates discourages leveraged investing. This policy will dry up liquidity in the asset backed market (Shadow banking system). I'm looking for evidence of this in the Euro Dollar funding markets. I am also looking for it to occur in the Term Commercial Paper market. Shame on the Fed for setting us up for this systemic risk.
*Brazil, Argentina, Korea, Indonesia are going to scream bloody murder over perpetual ZIRP. Russia is likely to get downright ugly with their rhetoric. I wouldn’t be surprised if they took this opportunity to vote with their feet and just abandon the dollar as a reserve holding. China will also make noise. They will make more calls for a new international currency to replace the dollar. The Central bankers in Japan and Switzerland are puking in the trashcan over this. Bernanke is exporting US deflation to them. Shame on the Fed for pursuing Beggar my neighbor policies. They deserve all the global criticism they are about to get.
*Bernanke bills himself as a student of the Depression. He has said over and over that he would not make the mistakes that the Fed made in 1937 when a tightening of monetary policy triggered another wave of deflation. I think the history books will look at the Fed and August of 2011 and draw a similar conclusion. At a critical time in history the Fed has taken action. The mistake of 72 years ago DID cause a recession that lasted a few years. The mistakes of 2011 will mark a point in history where America turned a corner downward. One that will take a few decades to recover from. The history books will shame Ben.
It seems now that the Fed has announced its position of 0% for the next 2 years, they are inviting a run on the dollar... IMO.
So, who is actually allowed to borrow money from the Fed at 0%? You? Me? Nope... It is the Fed owner banks, including the INTERNATIONAL owner banks who are having so much fun now in Europe, one Japanese bank and ALL of the other central banks around the world ... if they want.
The buddies of the Fed owner banks, who do a lot of their dirty work buying up assets with cheap money will also be given cheap, but nor free money.
However, money for the masses will remain relatively expensive if available at all.
This is how power is maintained within a tight circle and the banks run the world, with the central banks being the inner circle. They decide who gets fiat money and who is deprived money; be it individual, business, politician or government.
The TBTF banks have stopped being "American" or anything else, they just need a primary US Treasury dealership and they are "in". They are the transnational, imperial, global vampires. Their daily food is the US budget deficit, the more, the better. Even the politicos are steered by this.
The Rest-of-the-world-CBs? Come on, they have to adjust all their policies to what the FED does.
Our global problem is concentrated in this group (now 17, from memory) of giant locusts, their needs steers all what the FED does.
And only the USA could "do something, fast", by breaking them up in pieces, same way the baby Bells were created, or a Glass-Steagall. Otherwise, we'll have to wait until "the Dollar is spent".
It is not just the TBTF banks. We also need to include the 200+ large multinationals regardless of their country of domicile. All of them are TBTF. Add to this the European Union, Britain, China India and a few others and you have the blueprint for total economic control. The recent FED audit has shown that the FED for all intent and purpose is the last backstop authority for the world debt based system.
The FED, BIS, World Bank and the IMF control economic life on this planet.
All these institutions have been approved by non directly elected national entities throughout the world. Their language is purposly the languages of Kenysian economics, mathematics, statistics and above all debt. Perpetual debt is the desired method of extracting weath from individuals and nations and doing so with a smile. Think of it, who needs wars of plunder when these worlwide institutions are able to syphon off wealth with the complicity of national governments.
Let them eat ZIRP!
Soylent ZIRP! It's people.
It's not free, we the taxpayers are footing the bill....fucking assholes at the FED and their criminal buddies. Doesn't ANYONE still love America??
I was just thi king the same. Where is all this fun cheap money?
on stage floors of Scores