Is The Fed Pushing Too Hard?

Tyler Durden's picture

It may seem like a rhetorical question but Citi's credit stretgy team fears that the Fed may be pushing a bit too aggressively at this stage. The chart below shows monetary policy (defined as the funds rate and the Fed's balance sheet) vs. a "market health" index comprised of economic factors, systemic risk metrics, and valuation metrics. Historically the two have tracked well, but not recently. The health index is firming, but policy is getting easier, not tighter. Is the Fed out of its depth here, or do they know something we don't?



Source: Citi

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greased up deaf guy's picture


lemonobrien's picture

when they start printing to buy gold; hyperinflation begins.


but, for now, it's like a big head fake to get us to buy stocks and golds while the banks sell, before we go off the cliff; truth is... the FED can't buy any new treasuries from the gov cause the gov can't sell'm until the debt cieling is lifted; which ain't even parts of the cliff baby.


i bets gold cause i know how humans are; but, i'm not stupid, i'm waiting for the big sell off in paper golds which always comes at the end of the year; and if we go off la-cliff, maybe into next year as well.

nope-1004's picture

The Fed knows that China is drastically reducing Treasury purchases.  The big banks need the liquidity to keep buying treasuries in China's absence to fund this beast, otherwise confidence is gone and the ponzi gig is up.


lemonobrien's picture

yep; and when the ceiling is raised again; probably to 18 trillion; maybe 20 if bama gets lucky; the fed will start to buy those too; and maybe even increase to say 100 billion a month.

trebuchet's picture

"Is the Fed out of its depth here, or do they know something we don't? "

- Out of its depth: Why? ENDOGENEITY


dmger14's picture

James Rickards gave an excellent video at CapitalAccount on youtube yesterday where he said that China is heavily buying gold so if the dollar tanks and they lose out on the treasuries they still have, they gain on their gold exposure.  He also said as we've heard before, the official holdings are likely to understate China's actual holdings of gold.  Perhaps China will simply get out of its treasuries by letting them mature and using the cash to buy US assets going forward such as they just did with the AIG purchase?

TraderTimm's picture

What if China's total holdings of treasuries are a mirage and they don't have to give a damn? Considering how everything else is rigged, why not the biggest, boldest lie? I base this twilight-zone theory on how reserved they've been. With the dollar heading to where it is, and the heavy foot of the Fed on the accelerator of debt - I'd be making a lot more noise if I had "skin" in the game. Wouldn't you?

What a headline that would make - "Treasuries Rigged - Anonymous Chinese Official Says"

TwoShortPlanks's picture

"Is The Fed Pushing Too Hard?"......let me put it this way; Some fucking KY would have been nice!

hairball48's picture

The Chinese aren't gpoing to make a stink about the Treasuries they hold. They don't want to crash the UST$ market. They'll just reduce treasury buying to as little as they can get away with...and virtually all of that will be on the short end...TBills to 2Yr stuff. And as said above, they'll buy whatever hard assets they can, when they can. The debt they have to hold on to will diminish in "real' value to the point it won't be significant relative to their economy. The Chinese will, in effect,  just "write it off".

earleflorida's picture

china doesn't need our paper now-- the imp/exp trade has compressed dramatically...

Miramanee's picture

QE 4152 anyone???

It is a period of civil war. Rebel pranksters, striking from a hidden base, have won their first victory against the forces of Taking White House Petitions Too Seriously. Specifically: They have secured the 25,000 signatures necessary to get a formal response from the White House to their call for America to build a DEATH STAR.

"Those who sign here petition the United States government to secure funding and resources, and begin construction on a Death Star by 2016," the petition reads.

"By focusing our defense resources into a space-superiority platform and weapon system such as a Death Star, the government can spur job creation in the fields of construction, engineering, space exploration, and more, and strengthen our national defense."

Some estimates put the cost of doing so at around $852 quadrillion, roughly 13,000 times the gross domestic product of the entire Earth

hedgeless_horseman's picture



...or do they know something we don't?

No, all the economic numbers are totally raw, accurate, transparent, and immediately available to everyone.  'Tis a free country.  Sun shining everywhere.  Efficient markets wherever you look.

Divided States of America's picture

What the FUCK is Bernanke thinking? Linking Interest Rates to Unemployment Rates?? When we all know they fudge the Unemployment Rate?

It will be more accurate if he linked interest rates to Gun Sales or to # of people on Food Stamps.

Poor Grogman's picture

They figure that they are stuck with structural unemployment, so interest rates will never rise anyway.

The policy feedback, justifies the policy in a self reinforcing cycle.

Clever bankster bullshit as per normal..

SgtShaftoe's picture

They are caught in an exponential trap.  They must print to keep the country solvent, but that's just the start of it.  They also have to keep printing exponentially more to keep the economy "appearing alive", else, the currency, the US economy, the US military power and US empire suddenly collapses.  The tulip bubble, Weimar, and Rome have got nothing on us.  When the US goes down, it's going to happen in about 10 seconds, not years, or hundreds of years.  The US empire could collapse so fast, drones would just fall out of the sky.  

john39's picture

long overdue....  but, that alone will not solve current world issues... the people responsible for destroying the United States from the inside will simply move on to other hosts and repeat the process.  they must be rooted out and dealt with.

LawsofPhysics's picture

Yes, people also forget that the Fed is a private bank with shareholders and owners.  People should ask themselves what do many private banks do, in the interest of their shareholders, when they become or see insolvency on the horizan.  Interesting times.

SgtShaftoe's picture

After US hegemony is over, every country in the world is going to want a piece of the guilty US officials, and those implicated in these war crimes.  Think of the Israeli Mossad Nazi hunters, but from fifty countries, not just one.  There will be no place to hide for them.  


that's what worries me... If the leaders in the US understand that and the implications, they won't go quietly, they'll start WWIII.  

dmger14's picture

The exponential function is a mo fo, and like inflation, 99% of people are as clueless about it as the original snorgtees girl!

DaveyJones's picture

"Is the Fed pushing too hard...?"    That's what pushers do

A Nanny Moose's picture

Why should any small group people possess the power to price money for millions of people?

This is starting to sound similar to a story of a certain captain hunting a whale

philipat's picture

"When we all know they fudge the Unemployment Rate?"

There is this little thing called U-6

Tommy Gunner's picture

I think Don Draper said 'QE to Infinity' sounds really bad - that makes people feel uncomfortable - it makes them want to buy gold and silver.

We need to counter this says Don - how do we say QE to Infinity without saying it - we say QE till the job rate is under 6.5% - we know that will only happen if there is some sort of miracle - we all know the QE is never-ending (until it is forced to end by implosion) - but of course the public is eternally optimistic - so they will believe the bullshit


And so this is how Ben announces America is on the path to becoming Zimbabwe - without causing a panic and a massive run on PM

LongSoupLine's picture

"market health"??


What the fuck is that?

A Man without Qualities's picture

It's similar to when they examine your prostate...

vast-dom's picture

the RHS is WRONG. The Fed is, according to adjusted RHS, not doing enough and yet Fed is impotent anyway to affect said adjusted RHS. Therefore, the Fed is making matters worse, and not by insignificant factor.

Pairadimes's picture

Only in this instance, they are not using their finger.

Dr. Richard Head's picture

It refers to the amount of money being stolen by the statists.

redpill's picture

-noun, -- an artificial personification of broken ponzi financial markets designed to convince stupid lemming retail investors that the economy is an organism recovering from a mild cold instead of a calculated system designed to confiscate as much wealth as possible from society and transfer it to the pockets of financial oligarchs.  Ex.  I told my clients that the market health was looking up and they should buy more loaded funds from me immediately.

DaveyJones's picture

it's a lot like the word "fuck" and its relatives. Strategically, it can be a noun, a verb, an adjective...

Id fight Gandhi's picture

People validate their existence at these banks by making things more complex and new ways of finding value.

But it sucks to be in tier 1 capital. They'll be showing everyone the door.

max2205's picture

funny, market "health" is near all time highs....change the chart boyzzz

fonzannoon's picture

The fed knows we are going off the cliff. All these pundits are explaining away the market going down by saying the fed will have to raise rates sooner than expected because of the UE rate going down. Once we go off the cliff we will shoot right back above 8% no problemo. The repubs will take the blame and 6.5% will seem years away again so everyone will know QE is here to stay.

Conman's picture

Not necessarily. Need to understand how unemploy keeps dropping. More poeple leaving labor force. More people getting on disability or welfare. Trend still goign up meaning unemply rate will keep dropping with full time jobs becoming part time as well.

fonzannoon's picture

I understand how unemployment keeps dropping. When we go off there will be fresh layoffs.

adr's picture

Didn't you see the hard data from this week's labor report. Not a single state had fewer claims than last week, but initial claims still went down.

Real data showed massive job losses last month, yet 136k jobs were created.

The data manipulation must continue because "improving" data suports the stock market which in turn allows insiders to sell stock at higher levels so they can derive income from it.

You don't expect directors to actually do work for a living do you?

Hohum's picture

I think state data is for the week previous.

LawsofPhysics's picture

People don't "dissappear", they still need to eat and many are engaging in work and accepting other medians of exchange.  Funny, you'd think that the Fed was trying to kill the FRN or something.

CPL's picture

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NotApplicable's picture

*channels Spicoli*

Duuuuuude, wait. $400 AND a picture of my brain!

A. Magnus's picture

"No, all the economic numbers are totally raw, accurate, transparent, and immediately available to all. 'Tis a free country."   /sarc

There, fixed it for ya!

Body of Lies's picture

DC needs to be FED ... is it a push or a pull?

LawsofPhysics's picture

Yes, intentionally. They see the writing on the wall.  To reference another poster in another thread, time to find out "who's bitch is who's".

centerline's picture

Just like the conversation from yesterday.  The point of diminishing returns has been reached (or is very close).  The game has to change now.  Something funny must be coming.

LawsofPhysics's picture

Another poster told me that "the Fed is Congress' bitch, not the other way around".  Wake me when Congress tells the Fed to fuck off and stops paying all that fraudulent interest.  Ron Paul would agree with the poster, now remind me, how did the GOP treat Ron and his delegates again?

tooriskytoinvest's picture

Fed Easing Pushing Investors to Buy Junk Bonds, Stokes Risk of Bond Reckoning, Benefits the Super-Elite At The Expense of The Little Guy, Fuels Fears of US Currency War, Increases Inequality And Fails To Stimulate The Economy.

Conman's picture

Someone tell Bernanke if he pushes too hard he'll get hemorrhoids. or a prolapsed anus.

hidingfromhelis's picture

Is the Fed pushing too hard?

Pushing on a string never worked in the first place.  Funny that a connected TBTF posed the question though.  

LawsofPhysics's picture

Don't worry, he is already well-positioned in the asian currencies that will make up the new reserve basket with gold backing.  Once that trade is public (and no longer profittable), you will get your chance.