Kevin Warsh Exposes The Fed's Market-Based Dilemma In Under 90 Seconds

Tyler Durden's picture

"The reality is,"Kevin Warsh exclaims, "QE policy favors those with big balance sheets, those with risk appetites, and access to free money," while real people "are still looking around and saying what is fed policy doing for me." The problem, he explains, is a disconnect between what markets are discounting about the future and the Fed's credibility with regard their apparently divergent forecasts for unemployment, growth, and interest rates. In a little under 90 seconds, Warsh explains the dilemma and sums up the Fed perfectly, "they're just talking, rather than acting."

"The challenge for [The Fed] in December is to convince the markets that both their economic forecasts are right - that is the economy will be growing at 3.5% in 2016, the unemployment rate will be in the fives - and yet, interest rates still at zero.

 

My view is one of those has to give.

 

If the economy is roaring as much as they say, markets will not believe that the Federal Reserve will keep the Fed Funds rate at zero in that environment. The alternative is the economy is stuck at around 2% growth in which case it is possible that rates and yields stay quite low."

90 Quick seconds of uncomfortable enlightenment...

 

 

His later comments did not entirely suggest confidence in the short-term future...

"Financial markets tend to test new chairmen. They did it to Paul Volcker. They did it to Alan Greenspan," Warsh said. "They challenged Ben Bernanke and his new team eight years ago."

 

"I've got every bit of confidence that [Yellen] is going to realize that being chairman is frankly a very different set of responsibilities ... where most of us get to sort of chatter from the cheap seats. She's got to make the tough decisions."

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
TruthInSunshine's picture

"I've got every bit of confidence that [Yellen] is going to realize that being chairman is frankly a very different set of responsibilities ... where most of us get to sort of chatter from the cheap seats. She's got to make the tough decisions."

WTF is so tough about CTRL + P?

MOARYELLEN

ghengis86's picture

The printing is easy. It's the selling your soul to the devil and having the banker's hands up you ass flapping your mouth hole for you that's tough.

remain calm's picture

Yellon will be printing like a Felon.

Boris Alatovkrap's picture

Boris is expose Fed Dilemma in under 10 second (less than maybe 100 word)...

Federal Reserve is private bank cartel and is get greedy and lately, not sheer sheeple, but is slaughter sheeple wholesale and is lose all credibility. Double speak is no longer work, not even on participating bankster and very quick is massive exodus from Bank-o-sphere paper asset to hard asset.

In shortness, fecal matter is now in direct proximity for contact with high velocity rotational pressure inversion apparatus.

Okay, maybe is over 100 word, but Boris is sometime to struggle with formation of English prose.

prains's picture

Boris is very much leader of new prose

Bay of Pigs's picture

I'm sure Mr Yellin is up to the task.

Print MOAR!

malek's picture

 My view is one of those has to give.

How about to just fudge one number enough.

 

darteaus's picture

"...while real people are still looking around and saying what is fed policy doing for me?"

Answer: impoverishing

ghengis86's picture

The only thing the Fed is doing is steeling my RESERVE to stock up on FEDERAL ammunition. Copper jacketed lead and brass are the real prescious metals.

rayduh4life's picture

Don't forget canned food - the other PM

SDShack's picture

Answer: impoverishing

I think a banker or a politician would call it "redistribution".

ultimate warrior's picture

Bullish to infinity and beyond!  

Seize Mars's picture

Son of a bitch! You just tricked me into clicking on CNBC!

rocker's picture

Kermit is a survior of 1987 Crash.  He has a (LOL) unearned masters degree. He came to CNBC to sway public opinion.

He did not get the response he desired from Kevin Warsh.  CNBC's biggest Scumbag: Joey Kernen. Called "the Kahuna"

Kahuna means a mithical sorcerer, wizard or magician who is suppose to be a expert in any profession.  (LOL)

DeadFred's picture

Lysol and Clorox bleach work wonders to remove the lingering stench.

Running On Bingo Fuel's picture

Talk about stench. ZH needs a fucking cleaner.

Jane Lauder, wife of Fed Governor Kevin Warsh, who through her connections made Kevin Warsh "wealthier than all the other Fed Governors combined." [1] (With her father Ronald S. Lauder, whose father invented and began selling makeup [Estee Lauder] and bequeathed the company to him. He is also the owner of the only private air force base in the US, Stuart Air Force Base, which was an alleged landing point of plane(s) on September 11th, 2001.)

http://jewishfaces.com/banking.html

Over?

And what's funny is the overall tone of the comments since the last post about Warsh. He's now a hero on The Hedge.

Charles Nelson Reilly's picture

""I've got every bit of confidence that [Yellen] is going to realize that being chairman is frankly a very different set of responsibilities ... where most of us get to sort of chatter from the cheap seats. She's got to make the tough decisions."

Yeah.... Something tells me that this little academic Queen hasn't faced one real difficult decision in her life. When an equality discussion at a fruit loop Berkeley cocktail party tops the list as life in the hot seat experiences, I suggest all hedge accordingly. I wouldn't trust this freaking broad to coordinate a school bake sale, much less run the world.

This shit will blow up like everything else Obozo and his moron lemmings touch,

ToNYC's picture

Yellen be left,

holding the bag.

Cursive's picture

 

Yep, this about sums it ALL up:

"The challenge for [The Fed] in December is to convince the markets that both their economic forecasts are right - that is the economy will be growing at 3.5% in 2016, the unemployment rate will be in the fives - and yet, interest rates still at zero.

 

My view is one of those has to give."

 

Al Huxley's picture

Duh.  I wonder who's going to get fucked by the FED - the average guy or the super rich guy?  Or would it be fair to guess that since they've being fucking the American general public for so long now anyway that they're probably used to it now, and it would be awkward at this late stage to switch over and start fucking the ultra rich.

RaceToTheBottom's picture

Hey look, CNBC is still on the air.  Will wonders never cease.

ebworthen's picture

"What is FED policy doing for me?"

ABSOFUCKINGLUTELY NOTHING!!!

Until Main Street understands that the FED is a thieving raping Homunculus from Jekyll Island and that Politicians are whores and boot shiners for bankers and elites - the pain, punishment, and misery will continue.

Those fucking parasite politicians better keep the ever-growing dependency population well fed on bread and circuses and EBT/Medicare/Welfare/Social Security/Social Security Disability or they are going to make the French Revolution look like a walk in the park.

Talk about a gamble; this is the biggest gamble in the history of humanity. 

Never, ever, have there been so many millions, so many billions, teetering on the tightrope of the chicanery and legerdemain - the razor's edge of skullduggery and malfeasance - of such a lot of dunces and charlatans, as the current pitiable masses of individuals and families.

A crime of speice-al proportions!!!

Pure Evil's picture

What a lot of people fail to comprehend is that the D.C. elite have learned a lesson from the French Revolution. If you drive through D.C. and any of the counties surrounding the beltway you'll understand what I'm talking about.

The economy is extremely robust with plenty of jobs, high salaries, and plenty of shopping centers to spend the money.

Having driven through D.C. two to three times a year for the past 12 years I have seen the economic growth and expansion of the area. And, it hasn't stopped even with the rest of the country suffering from The Greatest Depression.

The last time I drove through back in April they were expanding the HOV lanes on I-95 all the way down to Richmond thereby extending their tentacles into the Old Dominion and with the eventual plan of taking over the whole eastern part of the State of Virginia just like they did with Maryland. They've also built concrete sound walls along both sides of I-495. They just spent billions building a new Woodrow Wilson bridge across the Potomac and billions more upgrading the I-95/I-495 interchange just north of the Woodrow Wilson bridge. And, they're spending billions more upgrading all the other I-95 interchanges in the D.C. area like the I-295, I-395, and the new I-895. Yep, they're upgrading infrastructure and providing shovel ready jobs, just not in your state. In fact they're stealing from you to make their lives more pleasant.

If any revolutions do break out they can slow them down considerably by shutting down the electrical grids and isolate specific areas by limiting delivery of essential goods. In that context people that were planning on marching on D.C. will in turn be forced to fight off the hordes and possibley their own friends and neighbors that will come out searching for food and water.

Whereby the French elite failed to take into account the extreme poverty that immediately surrounded them with easy access to the upper classes. The D.C. elite are surrounding themselves with a well paid and well fed proletariat. Not to say these people will lay down their lives for the politicians and banksters when and if the SHTF, they've just eliminated a few of the immediate dangers by keeping the surrounding plebeians fat and happy.

Herodotus's picture

A good hedge would be to short D.C. real estate.   There is going to be a lot of vacant office space there when this whole thing finally blows.

Not Goldman Sachs's picture

EB,

I feel your anger and agree, except you underestimate the power of the US Military and the police state we live in.  If the Sheeple ever uprise the .01% will ensure that their assets will be protected and our own military will turn on the US citzens, especially when the upper crusties give out some of their wealth to them for protection (just like all other worldwide corrupt regimes).  All they need to do is claim that US citzens with weapons are domestic terrorists and boom, Drones produce instant elimination.

Game over. uprising put down.

flyonmywall's picture

You're right on Charles Nelson.

Those LSD laced doctorates at Berkeley would not know the real world from their own cocktail napkins. Discussing policy and writing for the Journal of Experimental Psychology isn't what I'd called the real world.

Eeyores Enigma's picture

The feds dilemma is that it can't print resources which is the ONLY thing that will spur growth in the real world/real economy and nothing else matters.

BTW technology can't solve for this predicament either.

 

 

Paracelsus's picture

In the '70's inflation surged in Australia and interest rates zoomed to 18% to cool off the economy before the public started making salary demands (Unions existed at the time,and there were tariff walls still protecting the manufacturing sector).

Should inflation take off here in the USA,the FED will not raise rates because the Toxic MBS rubbish the banks have unloaded onto the FED would begin to explode.The mortgages would begin to default,and the FED overpaid for them anyway.The true market value of this MBS crap should be a fraction of the booked value.The charade continues.The flip side is nobody overseas will buy Treasuries because they do not reflect the true risk of the unstable nature of the US economy.

Someday when the dust settles,and the bankers have all been shot,the real culprit that led to WW3 will be identified for humanity: the New York Fed.....

Pure Evil's picture

Not to burst any bubble here, but the reason the FED is buying all that MBS crap is to not only take them off the commercial banks books, but to also eventually flush them down the memory hole.

The FED prints the money to buy the MBS crap but the banks still get to foreclose on the real estate. Thereby they get to issue new mortgages for all the foreclosed properties and sell them to entities like Black Rock thereby obfuscating the need to investigate what's happening to all the MBS the FED has on its books.

All the while people are encouraged to unload all their old mortgages by refinancing thereby eliminating some of the MBS crap sitting the FED books or the need to buy some of those toxic securities.

These people are financial alchemists and in ten or twenty years do you think anyone other than maybe ZH will be questioning what happened to all that MBS crap the FED had on its books?

I doubt it.

All the FED is doing is paying off the mortgages but they aren't taking control of the deeds to the properties.

And, if they have to they'll de-charter the FED, declare it bankrupt and re-charter a whole new FED with a new currency if it comes down to it. These people have more card tricks up their sleeves than a con artist peddling three card monty on the streets of NYC.

PubliusTacitus's picture

The US economy will never see 2% annual growth again as long as the current regulatory and tax scheme is in place.

 

Ignore any forecast above 2% - it’ll never happen.  All forecasts above this level (including CBO & the Fed currently) are dead wrong.

 

The implications of this are profound and terrible.

yogibear's picture

This guy was one the soulless bastards. These Fed banksters move on to Wall Street to help the financial criminals.

Colonel Klink's picture

Just another New Yawk and Harvard douche.  Fuck'em, I'm tired of listening to the same shills.  Along with his JAP wife.  This schmuck also use to work at the FED.  Therefore he has zero believability to me.  He'd lie to every goy out there.

99% of CNBC's experts fit the same cookie cutter mold from the 2% of the population.

 

https://en.wikipedia.org/wiki/Kevin_Warsh

HileTroy's picture

Guys I have been waiting for years to find this 21 seconds snipt of the state of the world.

http://youtu.be/EVI-Lcs77ao

 

Enjoy and Happy Thanks Giving

 

HileTroy's picture

Guys I have been waiting for years to find this 21 seconds snipt of the state of the world.

http://youtu.be/EVI-Lcs77ao

 

Enjoy and Happy Thanks Giving

 

carbonmutant's picture

If the market will move on talk, Why act?