FOMC Minutes: Hawkish Rumblings Getting Louder

Tyler Durden's picture

It would appear that even though the relative dovishness of the FOMC has increased, a realization that the party has to stop sometime is dawning on the PhDs - though for now, the printing will continue until morale improves...


Pre-FOMC: ES 1521.00, 10Y 2.01%, EUR 1.3337, Gold $1580, WTI $94.18

Some of the key sections:

However, a few participants expressed concerns that the current highly accommodative stance of monetary policy posed upside risks to inflation in the medium or longer term.

On the death of Okun's Law:

A number of participants thought that the growth of potential output had been reduced in recent years, possibly in part because restrictive financial conditions and weak economic activity in the aftermath of the financial crisis had reduced investment, business formation, and the pace of adoption of new technologies. Many of these participants worried that, should the economy continue to operate below potential for too long, reduced investment and underutilization of labor could further undermine the growth of potential output over time. A couple of participants noted that uncertainties concerning both the level of, and the source of shifts in, potential output made it difficult to base decisions about monetary policy on real-time measures of the output gap.

But punchline #1:

Several participants emphasized that the Committee should be prepared to vary the pace of asset purchases, either in response to changes in the economic outlook or as its evaluation of the efficacy and costs of such purchases evolved. For example, one participant argued that purchases should vary incrementally from meeting to meeting in response to incoming information about the economy. A number of participants stated that an ongoing evaluation of the efficacy, costs, and risks of asset purchases might well lead the Committee to taper or end its purchases before it judged that a substantial  improvement in the outlook for the labor market had occurred. Several others argued that the potential costs of reducing or ending asset purchases too soon were also significant, or that asset purchases should continue until a substantial improvement in the labor market outlook had occurred. A few  participants noted examples of past instances in which policymakers had prematurely removed accommodation, with adverse effects on economic growth, employment, and price stability; they also stressed the importance of communicating the Committee’s commitment to maintaining a highly accommodative stance of policy as long as warranted by economic conditions. providing monetary accommodation by holding securities for a longer period than envisioned in the Committee’s exit principles, either as a supplement to, or a replacement for, asset purchases.


A few participants commented that the Committee’s accommodative policies were intended in part to promote a more balanced approach to risk-taking, but several others expressed concern about the potential for excessive risk-taking and adverse consequences for financial stability. Some participants mentioned the potential for a sharp increase in longer-term interest rates to adversely affect financial stability and indicated their interest in further work on this topic.

And #3:

Many participants also expressed some concerns about potential costs and risks arising from further asset purchases.

Another headfake from a Fed which will never, ever stop monetizing, or just more schizophrenia from Bernanke and Co? Why both of course.

And, in tangential news, this is what @Not_Jim_Cramer suspected the real minutes wordcloud looked like...

Full minutes:

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tecno242's picture

today is an example of why the FED is hosed.

Bond prices falling, stocks falling, commodities falling... nowhere to put your money except the mattress if they ever attempt to pull back on QE or reduce the size of their balance sheet

if they try to pull out... velocity of money will plummet

eclectic syncretist's picture

Bernie in wonderland has to print faster and faster just to stay in place.

slightlyskeptical's picture

Exactly. There is no where to run. Cash is actually king because it will lose less value than everything else.


Did make a nice round trip on SSO puts today.  If no closing rally, I will reup at the close.

CaptainSpaulding's picture

Whilst reading the cloud, I could of sworn i heard Yoko Ono's voice in my head saying,  "if, You become naked"

Bastiat's picture

Yeah, Bennie, stop monetizing the debt and see how that goes.

Confundido's picture

If they don't buy the Tsys...who will? 

By the way, can we say that gold is a Giffen good?

Carl LaFong's picture

Same old, same old. If somebody really believes they're going to stop QE anytime in the next couple of years, I've got a bridge in Brooklyn I'd like to sell you....If they stop QE, the stock market would crash and the increase in interest payments would cause the country would explode in about 5 minutes. Does anybody really believe they can or will stop QE before they are forced to do so by either bond vigilanties or by the fact that nobody will buy any more bonds? And let's not forget, there's a currency war going on and that means a race to the bottom whether they like or not...because the alternative is a stronger USD and zero exports....Next move - watch your back because your retirement accounts will be forced to buy US debt --- for your own protection, of course.

edifice's picture

We have exports (besides raw materials)?

ebworthen's picture

These people have no fucking clue.

"Easing may prompt excessive risk."

Where was this genius insight in 2001-2004?

Where was this sentiment in 2008-2012?

"Concern about risk of more QE."


So why did you assholes do any of this bullshit at all for the past twelve fucking years!?!?!

These criminals are Yo-Yo's on banker's strings.


rubearish10's picture

Confusion could cause reeduced confidence in transparency. Could cause problems. Nah! Buy stocks, it's the right thing to do.

Quinvarius's picture

I remember before they announced 2 QEs back to back when people thought they were done.  However, doing the math, the banking system is still insolvent, the US government needs to be supported, and the bond market is about to collapse.

riphowardkatz's picture

deflation scare. blow a balloon up to fast and it will pop. to get the max inflation got to go slow.

Mr Lennon Hendrix's picture

Gold and silver down more.  Wow.  And here I was, thinking that balance sheets had to....balance.

Confundido's picture

Where is gold tomorrow after the 8:20m take down?


1,580? 1,575? 1,570? 1,565? 1,550? 1,525? 1,515?

Mr Lennon Hendrix's picture

Well if you are stacking bullion and you are planning on buying tomorrow then you would want 1,515.

fonzannoon's picture

I am shooting for one more big purchase around $1200 and then I am cutting out to costa rica or somewhere and will sit on the beach and look for the big puff of smoke in the distance.

Mr Lennon Hendrix's picture

You won't see 1200 unless the DJ gets cut in half.  Good luck with that.

fonzannoon's picture

you think I am a stock market bull? I see the dow in half as overvalued.

Bastiat's picture

This is the move the fuckers cover on--they'll buy bullion, lock up delivery contracts with miners, have ABX buy up juniors for nothing and sell forward to the bullion banks.

Winston Churchill's picture

Dollar cost average on the way down,just as you should have on the way up.

This may be the last hurrah.Gold should be going up by common sense unless

the PTB are creating a buying oppotunity for themselves..

Nerve,balls  and strong hands required now.

Taffy Lewis's picture

I'm waiting for 1500. Come'on, baby! Lend a helping hand to a happy stacker (and saver: fuck you Bernanke).

Xibalba's picture

fuckers and akedemics unite!

Caracalla's picture

Bought 1000 shares AQC/4000 shares PAAS....ready for the rocket to launch!!

RationalPrepper's picture

Wow!  Bigger stones (and wallet) than I.  Best of luck.

Canadian Dirtlump's picture

QE stops the day after I grow a 4th ball ( I won Lance Armstong's derelict second ball in an indian leg wrestling match ).

SillySalesmanQuestion's picture

Fuck you Fed - pay me!

debtor of last resort's picture

Seasonally adjusted QE. Whahaaa! "We thought we pumped 130 billion, but it was only 90", followed by crude black falls... and melting silver falls... And the "missing" 40 billion into s&p. Get it.

delivered's picture

They (being all CB's and governments around the globe but especially in Japan, Europe, and the US) have created a monster that simply cannot be stopped. All three currencies including the Yen, the Euro, and the USD are doomed but not because of just CB policies, no its the enormous debt loads that simply cannot be repaid. So today the merry-go-round or circle jerk is now back in favor of a strong USD and weak Euros and Yens. The excess liquidity in the market just doesn't know where to park the cash as everyone is scared to death of the Yen (and rightfully so given the structural political, social, and economic problems present in Japan) and now the short-term party is over with the Euro (as major rumblings are being heard from Spain and Italy again and now France and even the UK, although still using the Pound). Beyond these three currencies/markets, there is simply no other place to move the huge amount of liquidity into as the Yuan and China are not ready to absorb it and the emerging markets are simply not big or stable enough.

But the real killer with the higher USD is as follows. First, we already know that demand from trading partners is poor, especially from Euro (just look at US auto manufacturer results from Europe). Strike one as real demand is weak. Second, a higher USD means even lower global demand from increasing prices. Strike two. And finally, the higher USD will result in downward pressure on foreign operating results when converted for financial reporting purposes. Strike three and you're out. I believe P&G is going to take a $250 million hit just from the devaluing of the Venezuela currency so imagine would could happen with earnings when other companies have to begin the translation process.

So this is getting to be like cruise ship passengers running from one side of a sinking ship to another hearing that there are lifeboats available to escape. Back and forth we go with the rocking getting worse and worse until the entire thing to capsize. And every time the markets get spooked a little more, the run back to the USD occurs with PMs getting pounded along the way. It happended all the way back with a small country in the Middle East, again with LB and BS, again with Portugal, again with Greece, again with Ireland, etc., etc., etc. Each time, PMs get pounded as the reverse relationship with the strenght of the USD kicks in but in the end, PMs fine a way to increase in value but not because of the CBs, no because everyone realizes that just like yesterday and today, tomorrow the world will add another layer of debt on to the massive pile of crap already present just hoping that the next incremental addition doesn't bring the house of cards down.

The Fed knows this and while it may talk a good story about the "need" to show some restraint with QE, it simply is in too deep at this point. So just like every other false negative over the past decade as it relates to decreasing PM prices, be prepared for another one as anyone that has been in PMs for 10 plus years has witnessed 10 to 20+% corrections numerous times before. The real message PMs are relaying is not that the Fed may or may not change its policies but rather what the run-up in the value of the USD is saying. Simply put, Japan is a mess and Europe has no viable solution for its problems.


Karl von Bahnhof's picture

Fed knows that its time to flip this coin verbally to maintain illusion of control.
Verbal intervention is dead already.

casaananda's picture

Unbelievable slamdown in the PM's. Apparently it's the hedge funds that are dumping, too. O, to see equities tank and gold shoot the moon, but this is getting harder by the day. Can hardly believe mining stocks are getting hit so hard. NEM at levels at 40 now, where it was LONG AGO when gold was cheaper, much cheaper. I can hardly take it. VERY depressing and now I'm wishing I had much less allocated to PM's and the miners. Poorer by the hour, it seems.


RationalPrepper's picture

Hedgies liquidating GLD and SLV in anticipation of said equities drop??? 

Non Passaran's picture

Time to accelerate purchases... That's all..

Madcow's picture

they have no choice but to dramatically raise taxes AND dramatically cut spending - which is exactly what they're going to do - and why Gold is tanking 

Non Passaran's picture

Haha, a "dramatic" rise to 100% of income wouldn't help....
So why would they do it again?

Triple A's picture

I read a lot of different people, and martin armstrong has been the most accurate. Can someone tell me where he has been wrong. He does not seem to get much love here. He thinks the gold market will take off when the collapse happens around 2015. 

MFLTucson's picture

MODERATE GROWTH PATH' Really?  Take a fuckin look at the CAT numbers assholes!

Panafrican Funktron Robot's picture

Currencies tell the story.  "Somebody" is buying a fuckload of dollars, and selling a fuckload of other currencies.

Shizzmoney's picture

You can take these Fed Minutes and shove them up Bernanke and Fisher's asses.

This "internal" discussion between FOMCers is a delusion of a delusion of a delusion.

It's akin to shitty community theater, except maybe more comical to the astute free thinker.

I have a better chance of getting laid by Maria Sharapova than the Fed does of raising interest rates and cutting QE before 2015.

"If the Fed always cuts interest rates when asset prices tumble, but never raises them when they soar....."...then investors will be encouraged to take bigger risks. That makes bubbles more likely." - Steve Keen

Village Smithy's picture

These egomaniacs using trillions of dollars of our money experimenting with QE is no different than having a high school physics class experimenting with nuclear fission. "Don't do anything foolish with the reactor kids, I'm just going down to the supply room to get Ms. I mean some paper.

q99x2's picture

Easing may prompt excessive risk.

You've got to be fucking kidding me. Why'd you buy the goddamn 1.75 billion hollow points if you didn't think there was a little risk. Ya bankster M'Fers.

Tombstone's picture

Oh, what rubbish, you silly FMOCers!  Benny is already planning QE5 to keep pace with the mongrels at the central planning, er, ah, banking commision who insist on creating wealth using the power of instant money.  Good grief, everyone knows Benny will be buying gold, attempting to keep up with that Putin guy. 

optimator's picture

 Well, ya gotta admit it, they are really good at creating wealth.......for themselves.

CDNX fan's picture

Long the VIX March 13 calls from $1.40 today - whooop whoop whooop.

Melson Nandela's picture

Short the high cover the low sell the VWAP...nice future for my daughter...priceless.

Mi Naem's picture

News Flash: Ben Bernanke has a news conference scheduled at 9:30 tomorrow morning at which he plans to make the following concise announcement about today's FOMC minutes:  "Pssssyyyyyche!" 


They Tried to Steal My Gold's picture

This is the beginning of the Great Ponzi Exit Strategy - How to start selling and get out of the bonds without the market taking notice....Transparancy is over that they got the market in the upper range they wanted....

The Plunge Protection Team also has to exit their stocl positions too....

And finally the GREAT JOB CREATION STRATEGY has failed.....and they know it. THat they had any illusions otherwise. It's all about getting the politicians re-elected and why the whole staff wanted out 


They know its a PONZI .........Dow 5600 Gold 4200