This page has been archived and commenting is disabled.

Quote Of The Day: The 7% Target, Er, Threshold

Tyler Durden's picture





 

As equities celebrate today's better than expected jobs report (for now), apparently comfortable in the knowledge that it's good-enough-but-not-too-good, we are reminded that just six short months ago, none other than the Fed chairman himself uttered these crucial words during his June 19th press conference:

"...when asset purchases ultimately come to an end the unemployment rate would likely be in the vicinity of 7%"

So here we are at 7.0%... and no taper in sight as excuse after excuse is rolled out for keeping the floodgates open. Whocouldanode? This appears to right up there with "subprime is contained", "nobody really understands gold", and "tapering is not tightening." But still we are supposed to give great credibility to their forward guidance?

 

 

Via WSJ,

The jobless rate for May, the latest data Mr. Bernanke had when he laid out that guidepost, stood at 7.6%. Then it fell much more quickly than Fed officials expected, dropping to 7.4% in July and 7.3% in August.

 

In September, the Fed surprised many market participants and held the quantitative-easing program steady. At his press conference after that meeting, Mr. Bernanke made no mention of the 7% guidepost he’d set out a mere three months earlier. When asked about it, he downplayed the importance.

 

“There is not any magic number that we are shooting for,” he said. “We’re looking for overall improvement in the labor market.”

 

No Fed official has publicly uttered the words “mistake” when it comes to the 7% figure, which according to Mr. Bernanke had broad support among members of the Fed’s policy committee. But the about-face seemed to acknowledge the misstep all the same.

 

As we have noted numerous times before; the "taper" is all about economic cover for a forced move the Fed has to make because:

1. Deficits are shrinking and the Fed has less and less room for its buying

 

2. Under the surface, various non-mainstream technicalities are breaking in the markets due to the size of the Fed's position (repo markets, bond specialness, and fail-to-delivers among them).

 

3. Sentiment is critical; if the public starts to believe (as Kyle Bass warned) that the central bank is monetizing the government's debt (which it clearly is), then the game accelerates away from them very quickly - and we suspect they fear we are close to that tipping point

 

4. The rest of the world is not happy. As Canada just noted, the US monetary policy will be discussed at the G-20

Simply put, they are cornered and need to Taper; but know the 'bad' effect it will have... and given Bernanke's history os forecasting, how van anyone "trust" forward guidance?

What is needed is another central bank to step up and keep the party going...

 


- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Fri, 12/06/2013 - 12:21 | Link to Comment Dr. No
Dr. No's picture

Simple:  The FED chooses not to trust the unemployment numbers too.  keep printing. Forward.

Fri, 12/06/2013 - 12:27 | Link to Comment 101 years and c...
101 years and counting's picture

no. the fed simply knows without money printing, the US defaults.

Fri, 12/06/2013 - 12:37 | Link to Comment Occident Mortal
Occident Mortal's picture

They will taper when the budget deficit comes down and the US isn't selling so many Treasuries.

 

The Fed is just there to mop up all the extra Treasuries (and maybe a few more too).

Fri, 12/06/2013 - 12:37 | Link to Comment knukles
knukles's picture

Listening carefully to the Bernak and yet to be redacted (How does one redact wishie washie non-hard statements?  Oh, just as Red Line Barry...never-mind) he said clearly (wishy washy clearly) that the U number cannot be trusted because it is manipulated.
Just like stocks, gold, silver, interest rates, employment, trade, welfare rolls and Voting.  Yes, just like Voting.

Keep you eyes here, kids, I'll letcha know when the coast is clear to stop QE...  I didn't say a damned thing about what it's called...

And if they do cut back it ain't gonna be because of the economy growing.

It's gonna be because the Fed owns all the Treasuries in the Whole World Otherwise Needed For Collateral at the Pawn Shoppe to keep the Enterprise of Wealth, Freedom and Democracy Alive and Well.  Well, maybe not so Well, but Alive

It's Alive!
Look, a Pony!

Fri, 12/06/2013 - 12:51 | Link to Comment Headbanger
Headbanger's picture

Agree.  And what's with all these scared cheerleaders here lately?

I think they're a bunch of Wall Steeters who know their jobs are gone he second QE is tapered or they're Government types.

Fri, 12/06/2013 - 16:29 | Link to Comment knukles
knukles's picture

Oh, you noticed that, too, huh?
They're out in droves reinforcing the status quo...
Or cheer-leading for Bitcoin...
Which tell us that there's something up, amiss, don't look now but....

     ..... Hey look!  A pony!

Fri, 12/06/2013 - 13:33 | Link to Comment PT
PT's picture

I always translated it as:
"We're going to continue to lend money to idiots who will continue to bid prices way too high and beyond what anything is worth.  We are going to continue repossessing their stuff when they go bankrupt and hold it off market so we can lend more money to idiots and push prices even higher for the stuff that we do eventually sell, thus inflating the value of everything on our books way above what it is worth.  We will continue to lend money to a handful of banksters so the scheme can continue and they can pretend they are richer than what the economy can truly handle ... until sensible people manage to create real production and real jobs despite the fact that their competitors can be propped up indefinitely while they lose money."

Something like that, anyway. 

Fri, 12/06/2013 - 13:37 | Link to Comment PT
PT's picture

or "We will continue to subsidize the idiots until the sensible people can compete with them ... after we further subsidize the idiots because we can't afford to let them pay for the consequences of their actions ..."

Fri, 12/06/2013 - 12:28 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

 

 

Central Planning is hard.

Fri, 12/06/2013 - 12:29 | Link to Comment EscapeKey
EscapeKey's picture

The talent lies in exactly how furiously you can punch the "print" button.

Fri, 12/06/2013 - 12:41 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

 

 

As I have said many times before, if your only tool is a Heidelberg, every problem is deflationary.

Fri, 12/06/2013 - 12:52 | Link to Comment Stoploss
Stoploss's picture

Blast from the past. These two go together.

https://www.youtube.com/watch?v=8pEiLHnjAiw

http://research.stlouisfed.org/fred2/series/MZM

Have a look at MZM NOWWWWW!!!!!

Fri, 12/06/2013 - 12:35 | Link to Comment Calculus99
Calculus99's picture

Hilarious if they said that 'we don't trust the governments figures anymore'

Fri, 12/06/2013 - 12:40 | Link to Comment knukles
knukles's picture

That's what the Bernak already said, FFS

That U is untrustworty (Not you, but U) because of the fudge factors of thems not looking for jobs anymore.

Root for the Breadlines!
EBT Deluxe

Fri, 12/06/2013 - 13:17 | Link to Comment PT
PT's picture

It's all good.  If unemployment gets too close to 7% then they can always start using SGS figures!!!

Fri, 12/06/2013 - 12:24 | Link to Comment Non Passaran
Non Passaran's picture

ECB's turn!

Negative interest rates or some shit like that would be appropriate.

Fri, 12/06/2013 - 12:25 | Link to Comment QQQBall
QQQBall's picture

Ol' Yellen will shift the focus to wage growth, hours worked or some other metric. 

Fri, 12/06/2013 - 12:36 | Link to Comment EscapeKey
EscapeKey's picture

Number of millimetrics per metric fuckton of metrics.

Seasonally adjusted, of course.

Fri, 12/06/2013 - 12:25 | Link to Comment Martial
Martial's picture

What is needed is another central bank to step up and keep the party going...

Maybe there's a central bank on the moon somewhere.

Fri, 12/06/2013 - 12:26 | Link to Comment Ignatius
Ignatius's picture

Do they even blush when they publish these ridiculous numbers?

Fri, 12/06/2013 - 12:44 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

It's not a (detectable) lie if you believe it's the truth.

<Thus the reason 'they' select ideologues as headmaster of the insane asylum.>

Fri, 12/06/2013 - 12:27 | Link to Comment Bryan
Bryan's picture

The Fed knows the numbers are cooked and untrustworthy.  Moar smoke!  Moar mirrors!  Hilarity ensues.

Fri, 12/06/2013 - 12:26 | Link to Comment Tsar Pointless
Tsar Pointless's picture

Actually, not seasonally adjusted, the U-3 is now 6.6%.

Taper away, bitchez! I dare ya!

Fri, 12/06/2013 - 12:29 | Link to Comment Walt D.
Walt D.'s picture

The Sun also has to be shining in the place where the BLS pulls it numbers.

Fri, 12/06/2013 - 12:28 | Link to Comment The Axe
The Axe's picture

Hisl-a-dick  says Taper  likely in December..but no reaction....fucking joke

Fri, 12/06/2013 - 12:33 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

Too much attention paid to this needless obfuscation.

Truth is oil was in the low 90s for a while and the economy goosed.  Now it's headed back to 100 and that will dampen everything.

You can overthink this stuff.

Fri, 12/06/2013 - 12:33 | Link to Comment maneco
maneco's picture

The Fed knows the big international banks from New York/London/Paris/Frankfurt are insolvent and they dare not turn off the liquidity tap. It all goes back to Lehman. The failure of Lehman broke the daisy chain of OTC derivatives and IMO we are talking losses in the trillions that the Fed has had to take on its balance sheet. Quantitative Easing has nothing to do with Main Street, it is an on-going bailer pump for the big international OTC derivatives peddlers.

Fri, 12/06/2013 - 12:46 | Link to Comment frankTHE COIN
frankTHE COIN's picture

Agreed. And it appears that 2008 was the first part of the eye of the Hurricane. And while we are in this calm eye, Tyler is proving with all these HR 3293 , big bank bail- in - protective measures etc, that the Worst part of the Eye Wall is soon to make landfall.

Fri, 12/06/2013 - 12:34 | Link to Comment Inthemix96
Inthemix96's picture

The bearded clam is straight up financial terrist.

Arrest him, give him a fair trial, then peel the poisened littlw dwarf cunt to death, as well as the rest of the nation destroying cunts.

Dog, I hate these fuckers with a passion.

Fri, 12/06/2013 - 12:36 | Link to Comment Waterfallsparkles
Waterfallsparkles's picture

Yep, Heads I win, Tales I win.

I am omnipotent, I am the FED.

Fri, 12/06/2013 - 12:36 | Link to Comment Seasmoke
Seasmoke's picture

It's all starting to sound like Charlie Brown's teacher to me. 

Fri, 12/06/2013 - 12:36 | Link to Comment frankTHE COIN
frankTHE COIN's picture

If we can time the Short positions enough to get a majority of the Avalanche that's coming, it will be one of the trading opportunities of a lifetime.

Fri, 12/06/2013 - 12:37 | Link to Comment rqb1
rqb1's picture

Thanks for ZH for bring this up, but does it really matter?  

Earnings dont matter and accounting has been suspended.

 

Fri, 12/06/2013 - 12:39 | Link to Comment Yancey Ward
Yancey Ward's picture

That is the real question, isn't it- when is the Fed Funds rate lifted?  Will it remain where it is for the next year, the next two years, the next three?  Does anyone believe a single word put out by the FOMC in their "more transparent attempts at communication"?

Fri, 12/06/2013 - 12:46 | Link to Comment Madcow
Madcow's picture

Finally - they can stop all this QE madness and let the market determine the approprate rate on Treasury and Mortgage-backed securities. 

Fri, 12/06/2013 - 12:52 | Link to Comment A82EBA
A82EBA's picture

seems like taper talk is just to introduce a little volatility for trading purposes

Fri, 12/06/2013 - 13:01 | Link to Comment Lord Peter Pipsqueak
Lord Peter Pipsqueak's picture

So Bernanke lied, who woulda thunk it?

So what if they come out at the next meeting and say they are cutting to $70bn a month?the market will take a dive from ludicrously overbought levels,and they will still be goosing the markets with $70bn of funny money a month,and the day for increasing rates will be pushed further and further into the future.

If the market drops too far,they will increase the monthly buy in until it goes back up.There is nothing complicated or unknowable about this,it is all too damn predictable.

Fri, 12/06/2013 - 13:07 | Link to Comment khakuda
khakuda's picture

They are waiting for the stock market to be so euphoric the even with a taper it goes up. Knowingly or not they're trying to unleash a massive stock market bubble.

Fri, 12/06/2013 - 13:33 | Link to Comment The Invisible Foot
The Invisible Foot's picture

Got to love a negative debt monetary policy.

Fri, 12/06/2013 - 13:40 | Link to Comment GottaBKiddn
GottaBKiddn's picture

QE is pure and simple Theft.

"Forward Guidance" is a euphemism for "Rearward Thrusting", practiced by the inbred Shtupper Class.

Fri, 12/06/2013 - 14:40 | Link to Comment worbsid
worbsid's picture

1330 ET:  Get your 16K hats ready, only four or five points to go on the DOW.

 

We're there, we did it!  Congrate BLS!  Congrats HFT!

Fri, 12/06/2013 - 14:48 | Link to Comment B.J. Worthy
B.J. Worthy's picture

We've gone from

"Fuck U Bernanke!"

to:

"Fuck U!" -Bernanke

Fri, 12/06/2013 - 15:39 | Link to Comment El Hosel
El Hosel's picture

The Taper is nonsense anyway, made for TV jargon. The 85 billion a month is nonsense too, the Fed "is" the Market... period. 

The boogie man will show up eventually, it won't be Taper or whatever they do with the 85 Billion a month. 

Fri, 12/06/2013 - 15:56 | Link to Comment PowerPlayer
PowerPlayer's picture

We are about to see what a joke the Fed is.  Their word means absolutely nothing.  We are about to see that when the Fed says data dependent they don't actually mean data dependent.  

 

How on earth does 7.0% unemployment rate and a 3.6% GDP growth call for extraordinary monetary policy?  Monkeys could do a better job of running a Federal Reserve Bank than Yellen and Bernanke.    

Do NOT follow this link or you will be banned from the site!