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FOMC Minutes Reveal Nothing New

Tyler Durden's picture




 

Same members, same voters, same views, same tools:

  • *FOMC PARTICIPANTS SAW `SIGNIFICANT DOWNSIDE RISKS' TO GROWTH
  • *FOMC PARTICIPANTS SAW `PERSISTENT HEADWINDS' TO RECOVERY
  • *FOMC PARTICIPANTS SAW FISCAL POLICY AS A `DRAG' ON ECONOMY
  • *FOMC PARTICIPANTS SAID HOUSING MARKET IMPEDING RECOVERY
  • *FED OFFICIALS SAW MANAGEABLE BOND BUYING RISKS, MINUTES SHOW

Abridged version: "As Chuck Schumer ordered, we got to work."

Turns out the reason for QE3 was, get this, Europe...

Sentiment in financial markets improved notably during the intermeeting period. Participants indicated that recent decisions by the ECB helped ease investors’ anxiety about the near-term prospects for the euro. However, participants also observed that significant risks related to the euro-area banking and fiscal crisis remained, and that a number of important issues would have to be resolved in order to achieve further progress toward a comprehensive solution to the crisis.

... Not the US:

Participants noted that indicators of financial stress in the United States were not especially high and overall conditions in U.S. financial markets remained favorable. Longer-term interest rates were low and supportive of economic growth, while equity prices had risen. ... In the household sector, incoming data on retail sales were somewhat stronger than expected. A number of participants also observed that house prices were rising. It was noted that such increases, coupled with historically low mortgage rates, could lead to a stronger upturn in housing activity, although constraints on the capacity for loan origination and still-tight credit terms for some borrowers continued to weigh on mortgage lending.

But hey, there is a reason why Europe has pledged its vote for Obama.

The Fed once again confused cause and effect:

Business contacts in many parts of the country were reported to be highly uncertain about the outlook for the economy and for fiscal and regulatory policies. Although firms’ balance sheets were generally strong, these uncertainties had led them to be particularly cautious and to remain reluctant to hire or expand capacity.

Of course, the reason why everyone is uncertain is BECAUSE of the Fed's endless meddling in the market, the economy, and virtually every private sector. If price levels were actually allowed to clear, confidence would return overnight. Instead, the more the Fed intervenes, the more uncertainty there will be, the more Fed intervention, and so on until everything breaks.

In the meantime, the hawks were promptly silenced:

Some participants thought past purchases were useful because they were conducted during periods of market stress or heightened deflation risk and were less confident of the efficacy of additional purchases under present circumstances. A few expressed skepticism that additional policy accommodation could help spur an economy that they saw as held back by uncertainties and a range of structural issues. In discussing the costs and risks that such a program might entail, several participants reiterated their concern that additional purchases might complicate the Committee’s efforts to withdraw monetary policy accommodation when it eventually became appropriate to do so, raising the risk of undesirably high inflation in the future and potentially unmooring inflation expectations. One participant noted that an extended period of accommodation resulting from additional asset purchases could lead to excessive risktaking on the part of some investors and so undermine financial stability over time.

The highlight from the minutes:

A number of participants questioned the effectiveness of continuing to use a calendar date to provide forward guidance, noting that a change in the calendar date might be interpreted pessimistically as a downgrade of the Committee’s economic outlook rather than as conveying the Committee’s   determination to support the economic recovery. If the public interpreted the statement pessimistically, consumer and business confidence could fall rather than rise.

 

Many participants indicated a preference for replacing the calendar date with language describing the economic factors that the Committee would consider in deciding to raise its target for thefederal funds rate. Participants discussed the benefits of such an approach, including the  potential for enhanced effectiveness of policy through greater clarity regarding the Committee’s future behavior. That approach could also bolster the stimulus provided by the System’s holdings of longer-term securities. It was noted that forward guidance along these lines would allow market expectations regarding the federal funds rate to adjust automatically in response to incoming data on the economy.

 

However, reaching agreement on specific thresholds could be challenging given the diversity of participants’ views, and some were reluctant to specify explicit numerical thresholds out of concern that such thresholds would necessarily be too simple to fully capture the complexities of the economy and the policy process or could be incorrectly interpreted as triggers prompting an automatic policy response. In addition,  numerical thresholds could be confused with the Committee’s longer-term objectives, and so undermine the Committee’s credibility. At the conclusion of the discussion, most participants agreed that the use of numerical thresholds could be useful to provide more clarity about the conditionality of the forward guidance but thought that further work would be needed to address the related communications challenges.

They don't call it QEternity for nothing. Still it is very calming to know that nobody in the FOMC has any idea what to do in an open-ended regime, but sure know how to silence those economists whose DSGE models forecast "explosive inflation" should ZIRP continue indefinitely.

Full thing:

 

 

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Thu, 10/04/2012 - 14:08 | 2856452 redpill
redpill's picture

Why do they even bother meeting in a post QEternity world?  We all know how this movie ends, just is a matter of who plays "Old Yeller."

Thu, 10/04/2012 - 14:08 | 2856459 sdmjake
sdmjake's picture

Because Schumer told them to?

Thu, 10/04/2012 - 14:18 | 2856499 Ruffcut
Ruffcut's picture

Their bullshit, reveals plenty. None of which, is good.

 

Thu, 10/04/2012 - 14:22 | 2856503 nope-1004
nope-1004's picture

Those are the "public" minutes.  The private ones are quite different:

 

  • *FOMC PARTICIPANTS INSTRUCT OIL FUTURES 'MANAGEMENT' POST QE3 RELEASE
  • *FOMC PARTICIPANTS SEE THE NEED TO MANAGE GOLD / SILVER TOWARD ELECTION
  • *FOMC PARTICIPANTS ALL AGREED FED BALANCE SHEET WILL 'NEVER' BE UNWOUND
  • *FOMC PARTICIPANTS SAID THE CHICKEN WAS DRY - EVANS WHINING VERY 'PERSISTENT'
  • *FED OFFICIALS ACKNOWLEDGE MASSIVE BOND BUYING RISKS, MINUTES SHOW
Thu, 10/04/2012 - 14:24 | 2856548 AlaricBalth
AlaricBalth's picture

*FOMC PARTICIPANTS SEE THE NEED TO SOMEHOW GET GOLD HOLDINGS BACK FROM CHINA BEFORE POSSIBLE AUDIT.

Thu, 10/04/2012 - 14:24 | 2856556 redpill
redpill's picture

*FED OFFICIALS PREPARE SONIC DEATHRAY TO ADDRESS CURRENCY "MANIPULATORS"

Thu, 10/04/2012 - 14:45 | 2856661 jmcadg
jmcadg's picture

+1 for the dry chicken note :)

Thu, 10/04/2012 - 14:46 | 2856671 sdmjake
sdmjake's picture

*FOMC PARTICIPANTS DID GYRE AND GIMBLE IN THE WABE ALL MIMSY WERE THE BOROGOVES AND MOME RATHS OUTGRABE

Thu, 10/04/2012 - 14:55 | 2856710 redpill
redpill's picture

*FOMC PARTICIPANTS PLAN TO TOLCHOK SHORT POSITIONS IN THE GLAZZIES WITH THEIR ROOKERS

Thu, 10/04/2012 - 14:09 | 2856461 Stoploss
Stoploss's picture

Same old shit.

Thu, 10/04/2012 - 14:07 | 2856454 SilverTree
SilverTree's picture

No way!

Thu, 10/04/2012 - 14:12 | 2856471 azzhatter
azzhatter's picture

Saw Bernanke as a financial terrorist. Fuck You Ben

Thu, 10/04/2012 - 14:13 | 2856473 TwoJacks
TwoJacks's picture

*FED OFFICIALS SAW MANAGEABLE BOND BUYING RISKS, MINUTES SHOW

thought they could hold forever. where's the risk?

 

oh right, rome wasn't destroyed in a day

Thu, 10/04/2012 - 14:14 | 2856477 Bunga Bunga
Bunga Bunga's picture

FOMC PARTICIPANTS SAID HOUSING MARKET IMPEDING RECOVERY

Get rid of the housing market - problem solved.

 

Thu, 10/04/2012 - 14:14 | 2856482 LongSoupLine
LongSoupLine's picture

No worries...this will all end well.

 

silver.

Thu, 10/04/2012 - 14:16 | 2856492 jmcadg
jmcadg's picture

Where's the line ' HOLD SILVER DOWN AT ANY COST'

FED Fucktards.

Thu, 10/04/2012 - 14:17 | 2856494 digitlman
digitlman's picture

*FOMC PARTICIPANTS SAID CURRENT MARKET NOTHING BUT A SHIT SHOW

Thu, 10/04/2012 - 14:22 | 2856538 Ruffcut
Ruffcut's picture

"shit show" is the best description to date. 

No one has the cure for shit show, yet.

Drinking is only ole faithful remedy for the shitshow ailment.

Thu, 10/04/2012 - 14:17 | 2856497 Stoploss
Stoploss's picture

Best of all, there is a quick fix right under Ben's nose, and he can't see it.

Who will be the lucky recipient?

33 days.

 

Thu, 10/04/2012 - 14:18 | 2856500 PUD
PUD's picture

They should run a hose from the tailpipe of the Italian ambassadors $220k Masseratii into the room with the big table...right next to Evans and Plosner 

Thu, 10/04/2012 - 14:21 | 2856525 ptoemmes
ptoemmes's picture

I have a suggestion re: "communications challenges"...just STFU.  Quit meeting. Go away.  We'll miss you - NOT.

Thu, 10/04/2012 - 14:23 | 2856545 BrigstockBoy
BrigstockBoy's picture

Nothing left to do but wipe up with a warm washcloth...

Thu, 10/04/2012 - 14:24 | 2856550 ebworthen
ebworthen's picture

"It's a shit storm out there, the economy is in a dung heap!"

"Feed the cows more!"

Thu, 10/04/2012 - 14:31 | 2856588 hedgeless_horseman
hedgeless_horseman's picture

 

 

...raising the risk of undesirably high inflation in the future...

Risk?  Future?  Pay no attention to the last 6 months, look to the future, and who buys milk anyway? 

 

 

I bet

Thu, 10/04/2012 - 14:32 | 2856590 DavidC
DavidC's picture

How in Heaven does a report like this and the headlines result in NO move WHATSOEVER in the indices?! Or do I not need to ask?

DavidC

Thu, 10/04/2012 - 14:33 | 2856599 Christoph830
Christoph830's picture

"Same tools"

 

Nice double entendre Tyler!

Thu, 10/04/2012 - 14:36 | 2856613 Boilermaker
Boilermaker's picture
  • BOY TRAPPED IN REFRIGERATOR EATS OWN FOOT
Thu, 10/04/2012 - 14:41 | 2856637 sdmjake
sdmjake's picture

BOY TRAPPED BETWEEN ROCK & HARD PLACE ORDERS $40BILLION/MONTH OPENED ENDED EASING

Thu, 10/04/2012 - 15:00 | 2856735 topspinslicer
topspinslicer's picture

Nothing new under the STATIST sun

Thu, 10/04/2012 - 15:31 | 2856897 Racer
Racer's picture

*FOMC PARTICIPANTS DON'T SEE FOMC PARTICIPANTS AS REAL REASONS FOR SIGNIFICANT RISKS TO ECONOMY, WORLD AND LIVES OF MILLIONS FROM FOMC PARTICIPANTS CONSTANT MEDDLING

Thu, 10/04/2012 - 16:15 | 2857142 ghostfaceinvestah
ghostfaceinvestah's picture

Turns out the reason for QE3 was, get this, Europe...

I disagree.  QE3 is to fund the government, just like QE1 and 2.

The government, via the FHA and Fannie/Freddie, have greatly increased insurance/guarantee fees on mortgages in the past year.  But those fees drive up mortgage payments.  To get them back down, and to generate more fee volumne, Bernanke buys the mortgages, thus spurring demand and driving up fee revenue.

Note that Treasury announced that all profits from Fannie/Freddie going forward would go to the Treasury, then they announced gfees were increasing, and then Bernanke announces unlimited MBS buys.  This was all coordinated so Bernanke could print money to fund the government.

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