Fed Admits It Is Caught In A Reflexive Catch 22

Tyler Durden's picture


Here are the only key sections from the Minutes that matters, because they show clearly that the Fed is now fully aware of the Catch 22 quagmire it has caught itself in: suggest tapering due to an "strengthening economy" and watch "financial conditions tighten" (i.e., stock tumble, rates soar, refis plunge, housing market stalls, temp workers explode, etc) crashing the "economy"... or do nothing.

... the announcement of a reduction in asset purchases at this meeting might trigger an additional, unwarranted tightening of financial conditions, perhaps because markets would read such an announcement as signaling the Committee’s willingness, notwithstanding mixed recent data, to take an initial step toward exit from its highly accommodative policy...the tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement in the economy and labor market...  it was noted that if the Committee did not pare back its purchases in these circumstances, it might be difficult to explain a cut in coming months, absent clearly stronger data on the economy and a swift resolution of federal fiscal uncertainties.... postponing the reduction in the pace of asset purchases would also allow time for the Committee to further discuss and to implement a clarification or strengthening of its forward guidance for the federal funds rate, which could temper the risk that a future downward adjustment in asset purchases would cause an undesirable tightening of financial conditions.

Curious that the Fed decided to say the tightening of financial conditions was "unwarranted" - is there a "warranted" market crush and rate surge? Oh wait, Lehman. Never mind.

As for reflexivity: it's a bitch.

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Wed, 10/09/2013 - 14:24 | 4038630 Dollar Bill Hiccup
Dollar Bill Hiccup's picture

We need a FED Chair named Major Major Major.

Wed, 10/09/2013 - 14:27 | 4038636 tsx500
tsx500's picture

No...I've got a better idea...END THE FED !

Wed, 10/09/2013 - 14:31 | 4038653 Middle_Finger_Market
Middle_Finger_Market's picture

The labour market

Wed, 10/09/2013 - 14:31 | 4038659 HoofHearted
HoofHearted's picture

Instead we're changing Dr. Dumbass for Major Asshole. 

Wed, 10/09/2013 - 14:32 | 4038664 ronaldawg
ronaldawg's picture

Fat stupid progressive ugly MAJOR ASSHOLE - fixed

Wed, 10/09/2013 - 14:39 | 4038680 BTFDemocracy
BTFDemocracy's picture

Fed's printing visualized in physical $100 bills:


Wed, 10/09/2013 - 14:45 | 4038694 SafelyGraze
SafelyGraze's picture


1. treasury selective defaults on debt or "default" is redefined

2. republicans in house are replaced with democrats

3. debt ceiling raised or eradicated

4. shovel-ready green shoots happy days

5. whipsaw

Wed, 10/09/2013 - 16:31 | 4038750 hedgeless_horseman
hedgeless_horseman's picture



... the announcement of a reduction in asset purchases at this meeting might trigger an additional, unwarranted tightening of financial conditions, perhaps because markets would read such an announcement as signaling the Committee’s willingness, notwithstanding mixed recent data, to take an initial step toward exit from its highly accommodative policy...


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Wed, 10/09/2013 - 14:31 | 4038660 SilverIsKing
SilverIsKing's picture

Instead of $85B per month, they should say they are lowering their purchases to $70T per month. Do you think anyone would notice?

Wed, 10/09/2013 - 14:36 | 4038671 NotApplicable
NotApplicable's picture

Well, it took me a second.


Wed, 10/09/2013 - 14:57 | 4038740 Save_America1st
Save_America1st's picture

whooooooaaaaaa there...don't go off the rails now...better raise it up to 100B per month now just for even thinking of dropping it to 70B. ;-)

Wed, 10/09/2013 - 14:32 | 4038661 knukles
knukles's picture

OK, so what did they mean?
I don't know Knuks?
Well, neither do I.
Guess that leaves us in the same fucking boat where we arlreday were, right?
Nobody knows.
Well, we do.
Know what?
Oh yeah, confusion.
Which puts credibility at risk, right?
Good, Knuks.
Yeah, sure.
Well you know where we are, no?
No, I'm confused.
Oh, OK
Are we there yet?

Wed, 10/09/2013 - 14:35 | 4038672 fonzannoon
fonzannoon's picture

Don't you dare fucking short treasuries. Don't you dare fucking front run us and buy treasuries. Just fucking stand there while we buy them all.

 - The fed.

Wed, 10/09/2013 - 14:42 | 4038684 spastic_colon
spastic_colon's picture

"postponing the reduction in the pace of asset purchases would also allow time for the Committee to further discuss and to implement a clarification or strengthening of its forward guidance for the federal funds rate"

Translated means they will lower the UE target and raise the inflation target.

Wed, 10/09/2013 - 14:49 | 4038713 pods
pods's picture

That kind of language can only be delivered over TV, radio or the internet. If that was in person, they would get bitchslapped.

Shoe throwing would be more popular than cornhole.  

OT:  With the explosion in popularity of the game "cornhole," does anyone else giggle when you hear someone say it?

If it is a chick saying it, I am always obliged to reply to anything about that game with:

"You like cornhole? Nice."



Thu, 10/10/2013 - 07:44 | 4040776 StychoKiller
StychoKiller's picture

In other werdz the Fed is gonna have a "Print Party!" P, A, R, T, and why?  Because they GOTTA!

Wed, 10/09/2013 - 14:31 | 4038655 zorba THE GREEK
zorba THE GREEK's picture

Damned if they do and damned if they don't.......damn Fed.

Wed, 10/09/2013 - 14:33 | 4038667 pods
pods's picture

Coffin Corner.

Wed, 10/09/2013 - 14:42 | 4038690 Theta_Burn
Theta_Burn's picture

I used ta do a little but a little wouldn't do it
So the little got more and more
I just keep trying' ta get a little better
Said a little better than before
I used ta do a little but a little wouldn't do it
So the little got more and more
I just keep trying' ta get a little better
Said a little better than before


Thu, 10/10/2013 - 07:46 | 4040780 StychoKiller
StychoKiller's picture

"The Wheel"

Words by Robert Hunter; music by Jerry Garcia and Bill Kreutzmann
 Copyright Ice Nine Publishing; used by permission.

The wheel is turning
 and you can't slow down
 You can't let go
 and you can't hold on
 You can't go back
 and you can't stand still
 If the thunder don't get you
 then the lightning will
 Won't you try just a little bit harder?
 Couldn't you try just a little bit more?
 Won't you try just a little bit harder?
 Couldn't you try just a little bit more?
 Round round robin run around
 Gotta get back where you belong
 Little bit harder, just a little bit more
 Little bit farther than you than you've gone before
 The wheel is turning
 and you can't slow down
 You can't let go
 and you can't hold on
 You can't go back
 and you can't stand still
 If the thunder don't get you
 then the lightning will
 Small wheel turn by the fire and rod
 Big wheel turn by the grace of God
 Everytime that wheel turn round
 bound to cover just a little more ground
 The wheel is turning
 and you can't slow down
 You can't let go
 and you can't hold on
 You can't go back
 and you can't stand still
 If the thunder don't get you
 then the lightning will
 Won't you try just a little bit harder
 Couldn't you try just a little bit more?
 Won't you try just a little bit harder?
 Couldn't you try just a little bit more?


Wed, 10/09/2013 - 14:28 | 4038638 NaiLib
NaiLib's picture

Ample proof of just who is driving the indices. Why have an "analyst"on the payroll, when the level already is set by "algos" run by fed money.

Wed, 10/09/2013 - 14:26 | 4038639 Arius
Arius's picture

Tyler - too slow, Hilsenrath comes out within 15 second of the release

Wed, 10/09/2013 - 14:28 | 4038641 carbonmutant
carbonmutant's picture

Janet Yellen's first speech after nomination should be interesting...

Wed, 10/09/2013 - 14:36 | 4038669 pods
pods's picture

He certainly has his work cut out for him!


Wed, 10/09/2013 - 14:41 | 4038682 CPL
CPL's picture

It's going to be an interpretive dance number while she raps and beat boxes the entire tax code.  The best part of it is when she busts out the break out moves and starts grinding and twerking on Boeher and thong slapping his face.

After Boeher cleans the puke from his shoes, they twerk together and start a new dance craze called the Pork Slide.  For three weeks CNN will have one embarrassing clip after another to improve the acceptance of the pork slide.  Youtube clips fill the internet of conspiracy, addendum's, instructional methods and rants again the new dance craze nobody has ever seen happen outside of the nomination.

Shit's so cash...best nomination evar!

Wed, 10/09/2013 - 15:17 | 4038842 Serfs_Up
Serfs_Up's picture

How long will it take for Ole Yellen to grow a beard as long as Meechell's? Only the FED knows.

Wed, 10/09/2013 - 14:27 | 4038643 TheInformedShepard
TheInformedShepard's picture

Just watch gold bleed lower none the less because thats the easy thing to do, sell paper gold.

Wed, 10/09/2013 - 14:28 | 4038651 Seasmoke
Seasmoke's picture

Someone find Bernanke and ask him why the greatest student of the Depression is leaving us at this crucial point in time ????

Wed, 10/09/2013 - 14:34 | 4038662 Grande Tetons
Grande Tetons's picture

Another self proclaimed messiah bites the dust. Ben, do the right thing and make a big bowl of Jimmy Jones punch and share it with all of your believers. 

Wed, 10/09/2013 - 14:38 | 4038675 pods
pods's picture

I'd like for him to .357 his grey matter all over the wall and let Yellen try and read it to see where to take our system.


Wed, 10/09/2013 - 17:22 | 4039295 JungleJim
JungleJim's picture

Sorry, he's busy right now dropping a few more bars in his "grab bag" ....

Wed, 10/09/2013 - 14:31 | 4038654 monad
monad's picture

There's no place like home! There's no place like home! There's no place like home! 

Wed, 10/09/2013 - 14:32 | 4038656 williambanzai7
williambanzai7's picture


Wed, 10/09/2013 - 14:34 | 4038666 knukles
knukles's picture


Wed, 10/09/2013 - 14:46 | 4038700 disabledvet
disabledvet's picture

That is funny. "A mere three bagger" (I have one of those and can think of many others) is not enough. I think my "crazy bet on treasuries" (as. I called it back in January) is turning out to be just that..."too contrarian." The entire yield curve has now sold off...there is no panic, there is no material slowing in the recovery, the commodity space has been annihilated. Syria is off the table, the Affordable Care Act is on, the recovery has not stalled and if it ain't all about the inflation then certainly we're talking "flation." All my favorite names (save FB) have been annihilated this past week. For the record I own none and have access to very few. I look forward to owning a Tesla though.

Wed, 10/09/2013 - 14:33 | 4038665 pods
pods's picture

The FED has a gang of drunken footballers at the bar and they are scared to flick the lights signalling last call.

Yellen sure has his work cut out for him!

He better call Dr. Scholls and get gellin.


Wed, 10/09/2013 - 14:43 | 4038697 insanelysane
insanelysane's picture

Not sure if you are aware, but some media outlets are reporting that Yellen was once a female human.

Wed, 10/09/2013 - 14:51 | 4038718 pods
pods's picture

I'll take your word for it. Won't risk tuning in to that orgasmic celebration.


Wed, 10/09/2013 - 15:20 | 4038852 Serfs_Up
Serfs_Up's picture

Ole Yellen caused Liesman to jizz his shorts...all of them

Wed, 10/09/2013 - 14:44 | 4038692 khakuda
khakuda's picture

In other words, after 5 years of support, the markets have atrophied and cannot maintain current valuation levels without the continuation of free money.  If we stop, prices will drop back to market clearing levels and we don't want that.  God forbid we allow people to buy stocks, bonds and houses at lower and more reasonable price levels.

Wed, 10/09/2013 - 14:46 | 4038702 Miffed Microbio...
Miffed Microbiologist's picture

Beautiful rhetoric. Carefully worded to have a hypnotic, soporific effect. The feeling of leadership by wise intellectuals with humanity's well being is presented. Unfortunately, delving more deeply, one realizes the need for verbosity. It's to cloak the succinct real fact were totally fucked and the truth is not if,but when this fucker is going down. They are so transparent. People have got to wake up.


Wed, 10/09/2013 - 14:48 | 4038712 JR
JR's picture

John Tamny, a Forbes staffer who “covers the intersection of economics and politics,”  says central bankers are egotists who want control and adulation, that Bagehot could have predicted 100 years ago that Bernanke wouldn’t stop printing, nor will Yellen. She’s going to follow her predecessors; that's the way they are. Here's Tamny:

Obama's Nomination Of Janet Yellen Is A Blow To Recovery-Starved Americans

When the Fed announced in September that it would postpone indefinitely the cessation of the economic vandalism that is Quantitative Easing (QE), investors and pundits expressed surprise. They shouldn’t have. Walter Bagehot brightly telegraphed Fed Chairman Ben Bernanke’s QE audible well over 100 years ago.

In his 19th century classic, Lombard Street, Bagehot described the individuals who aspire to central banking positions as ‘vain’ and ‘grasping,’ and in doing so, he easily foretold what Bernanke would do. For Bernanke to have ‘tapered’ would have been for the man who so publicly lusted for and politicked for the Fed Chair to voluntarily remove himself from the limelight. Not on your life.

Central bankers live for the attention of people infinitely wiser and more accomplished than they are, and clearly relish the fact that true achievers hang on their every word. Alan Greenspan was a less than prescient Wall Street forecaster before he had reverential books (Maestro) written about him, and CNBC breathlessly reporting on the size of his briefcase ahead of interest rate decisions. This charitably average seer was made a somebody by virtue of serving as Fed Chair, and his service filled his vain and positively Herculean desire for adulation.

Having surely witnessed the lionization of Greenspan, Bernanke similarly lusted for a position that would catapult him to notoriety exponentially greater than his often obtuse musings about the economy had so far boosted him. To presume a ‘tapering’ from Fed Chairman Bernanke would be to totally misunderstand how he came to be Fed Chairman Bernanke. These aren’t people who run from the spotlight, rather it’s their unquenchable thirst for the spotlight that brings them to central banks to begin with.

Notable is that Bagehot, contrary to what is broadly assumed, was not a fan of central banks. He instead tolerated them, and felt they should eagerly fill their role as lender of last resort for solvent banks short on cash, not five times Fed bailout recipients like Citigroup. This is worth bringing up when we think about senior Fed officials, including President Obama’s nominee to replace Bernanke, Janet Yellen. These people not only tolerate central banks, but as evidenced by their professional choices in life, actually think them necessary.

They think them necessary despite the certain truth that absent crony creations like the Fed, long on cash businesses like Walmart and Microsoft would readily lend to solvent banks needful of short-term operating funds at a profitable, penalty rate. Since penalty lending to banks would come from private, for-profit businesses, it’s fair to say that they would lend to them much more carefully. And with the banking system operating under a market-driven lender of last resort, it would be much healthier for its weakest actors regularly being swallowed by its betters, as opposed to being bailed out.

Yellen’s nomination will bring up lots of questions to a verbally incontinent punditry about the good or bad of her policies, but that’s realistically to miss the point. Yellen wanted to be the Fed Chairman, Yellen, like Bernanke and Greenspan before her, politicked to be the Fed Chairman. Policies and beliefs matter, but the citizenry should fear Yellen simply because she wanted to run the Fed. She wanted to run an entity that’s always been wrong, that according to the wildly successful former head of BB&T Bank (John Allison) had “a 100 percent error rate in predicting and reacting to important economic turns” during his time running the bank.

Implicit in Yellen wanting to run the Fed is a belief that the cost of credit, easily the most important price in the world after the dollar, should be manipulated by her and other supposedly wise individuals laboring alongside her. Think about the stunning arrogance that underpins such a belief..


Tamny’s final line: “Like Bernanke, her hunger for adulation will cause her to continue ‘helping’ the economy stay afloat, and in doing so, she’ll cruelly rob us of the recovery we so desperately desire.”

Wed, 10/09/2013 - 14:51 | 4038723 bagehot99
bagehot99's picture

I don't know if I could have predicted it 100 years ago, but certianly not all that recently.

Wed, 10/09/2013 - 15:10 | 4038798 JR
JR's picture

The proof of your prescience (Bagehot's) is the 20th century. Tamny lays it out:

“The 20th century was in a sick-inducing way a gift to humanity for showing in murderously brutal fashion the horrors of central planning, yet Yellen honestly believes that she can divine the cost of credit better than can the infinite actions and decisions taking place every millisecond among billions of humans in the private markets.

“And while even the mildly sentient among us well know that money isn’t wealth as much as it’s a facilitator of the exchange of wealth, Yellen, like Bernanke before her, believes that the creation of money for the sake of doing so is the path to growth. The obtuse theorizing which informs this kind of thinking can’t be underestimated, and merits worried thought.”

Probably what would surprise Bagehot most is that American’s have allowed the Fed to continue for 100 years to use its boom and bust mechanisms – to issue and destroy the money - to suck out the very heart of the economy using its monopolization of all credit – the source of the cloud of America’s unhappiness, of her loss of economic security and liberty.

Wed, 10/09/2013 - 14:50 | 4038717 whirlybird rules
whirlybird rules's picture

The whirlybird flies in ever-decreasing concentric circles eventually to fly up it's own asshole and disappear...      end of the Fed!

Wed, 10/09/2013 - 14:55 | 4038736 moneybots
moneybots's picture

"the tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement in the economy and labor market... "


The improvement is based on a fraud. 

As noted in the debt ceiling debate, balancing the budget will result in a recession.  In other words, there has been no recovery from the 2008 recession.  Government debt is papering over the truth about the economy.

Wed, 10/09/2013 - 15:03 | 4038758 explosivo
explosivo's picture

It's almost happening. How much time is left in this paradigm? Months? Weeks? Days?

Wed, 10/09/2013 - 15:03 | 4038765 polo007
polo007's picture

According to CIBC World Markets:


Enter Yellen: What a New Fed Chair Could Mean for Policy

The nomination of Janet Yellen as Fed Chair, to be announced today according to the White House, and likely to be approved early in 2014, does not usher in a new era of more dovish policy for the Fed as some in markets may fear. Yellen’s FOMC voting record has matched Bernanke’s and her speeches have largely echoed the themes of her predecessor. Bonds may see a temporary boost on the appointment of Yellen to the helm (pending Senate confirmation), given her support of the Fed’s overall dovish stance. However, assuming an amicable passing of the current debt ceiling and budgetary deadlock, we see longer-term risks of a sell-off as the drag from fiscal policy eases in 2014, giving even a Yellen-led Fed justification to scale back bond-buying by early next year.

Profile: Vice Chair of the Federal Reserve, formerly Chair of the White House Council of Economic Advisers under Clinton and President of the Federal Reserve Bank of San Francisco.

No Perma-Dove: A look at Yellen’s speeches may lead some to believe that the next Fed Chair is a staunch monetary policy dove. Her emphasis on the destructive nature of long-term unemployment and the cyclical drivers of higher joblessness has highlighted the need for continued easy policy. She has also stated that the Fed’s growing balance sheet is not a roadblock to an eventual smooth exit from QE, and that there is no evidence that asset
purchases are harming financial market functioning. And as Chair the FOMC Subcommittee on Communications, she has been a driving force in formulating tools, including threshold guidance, which have been used to reinforce the Fed’s easing.

But Yellen is no easy-money ideologue. With the Fed facing the greatest downturn since the Great Depression, Yellen’s dovish views and speeches have simply hewn closely to the Fed’s overall dovish stance. A look at her voting record shows votes cast in line with the FOMC majority, including Ben Bernanke, with not a single dovish dissent since the onset of the crisis. Her lack of concern about inflation has been vindicated by the facts, with annual CPI trending below the 2% mark. And she hasn’t always been the voice for more monetary policy accommodation on the Fed. There have been episodes in her career when she has taken a more hawkish tilt, including the May 1996 FOMC meeting where she pointed to the “…need to be nervous about rising inflation”, later that year describing labour markets as “undeniably tight”.

Yellen’s Preferred Employment Indicators: One factor explaining Yellen’s support of the Fed’s easy policy is the continued stagnation in the jobs market. In a March 2013 speech, Janet Yellen identified her preferred indicators for gauging whether there has been a substantial improvement in the labour market outlook justifying a tapering in Quantitative Easing.

- Hiring as a share of employment (Chart 1, left)

- Job quits as a share of employment (Chart 1, right)

- Nonfarm payrolls (Chart 2, left)

- The pace of spending growth (Chart 2, right)

Only the quit rate, which could signal that workers are more optimistic about finding new jobs, has been trending stronger in recent months, with the remaining measures of job market health either flat-lining or softening relative to earlier in the year. So rather than a hawkish/dovish ideological slant, the cold hard fact that the US jobs market has yet to show signs of measurable improvement is likely the key factor motivating Yellen’s support for continued QE bond buying.

For now, fiscal uncertainty continues to cloud the outlook for US economic growth. But if policymakers in Washington are able to extend the debt ceiling and agree on a fiscal deal without new cuts to 2014 spending, an easing fiscal drag could see a 3%-plus pace of US growth next year. That substantial improvement in the outlook for economic activity and hiring could see the Fed begin to scale back the pace of its asset purchases by early 2014, to the surprise of many in markets who may be erroneously expecting more caution from a Yellen-led Fed.

Wed, 10/09/2013 - 15:04 | 4038775 Downtoolong
Downtoolong's picture

Enough with all the convoluted double speak.

Just tell me what price Kevin is going to bid AAPL up to by COB Friday.

Wed, 10/09/2013 - 15:47 | 4038949 traditionalfunds
traditionalfunds's picture

What if the Fed just started the taper without announcing it? Sure they would take some heat for not telegraphing their every bowel movement. But the actual taper will have less impact then all of the speculators & frontrunners. 


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