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Jon Hilsenrath's 555 Word FOMC "QE Is Dead, Long Live The Easy Policy" Summary

Tyler Durden's picture




 

1 minutes, 555 words, and Fed-whisperer Jon Hilsenrath declares that based on the FOMC minutes, QE is dead and now the uncertainty is all about rate-hike timing. Crucially, given the Fed's concerns over complacency, Hilsenrath explains, "while they don't expect rates to get very high because of lingering headwinds to the economy, they also don't want to give the public too much comfort that they'll remain near historically low levels far into the future."

 

Via The Wall Street Journal,

Federal Reserve officials agreed at their June policy meeting to end the central bank's bond-buying program by October, closing a chapter on a controversial experiment in central-banking annals with results still the subject of immense debate.

 

Officials have been winding down their purchases of Treasury bonds and mortgage-backed securities in incremental steps since January and have said they expect to end the program later this year, but until now haven't been explicit about the end date.

 

"If the economy progresses about as the [Fed] expects, warranting reductions in the pace of purchases at each upcoming meeting, this final reduction would occur following the October meeting," the Fed said in minutes released Wednesday from its June policy meeting.
The bond program aims to hold down long-term interest rates and drive investors into riskier holdings like stocks or corporate debt. That in turn is meant to stimulate borrowing, lending, spending, investing and hiring.

 

Critics have long argued the program risks causing another financial bubble or excessive inflation, without giving an obvious boost to hiring. Fed officials and other supporters of the program argue it has helped the economy grow faster than it would otherwise grow, with limited risk.

 

The Fed first started bond buying during the heat of the financial crisis in early 2009. It expanded its efforts in September 2012. Since the last expansion, its total holdings of bonds, loans and other assets have grown from $2.8 trillion to $4.4 trillion.

 

The Fed has already reduced its purchases in $10 billion increments to $35 billion per month from a peak of $85 billion. Its stated plan is to reduce it in increments at its next three policy meetings, ending it in October with a $15 billion reduction.

 

Behind the Fed's decision to wind down the program is a view that the economy is gradually strengthening, despite a first-quarter stumble in growth. However, in almost every area they discussed, officials appeared to strain to come to a common view about how the economy is evolving.

 

On the central issue of the job market, for example, they expressed a wide range of views. "Many judged that slack remained elevated," the minutes said, but "several participants pointed out that both long- and short-term unemployment and measures that include marginally attached workers had declined."

 

"Most participants projected the improvement in labor market conditions to continue, with the unemployment rate moving down gradually over the medium term," the minutes concluded.

 

They went in different directions on financial conditions, as well. "Favorable financial conditions appeared be supporting economic activity," the minutes said. "However, participants also discussed whether some recent trends in financial markets might suggest that investors were not appropriately taking account of risks in their investment decisions."

 

The Fed faces tough choices about the timing and pace of interest-rate increases in the months ahead. As this debate intensifies, officials have been moving away from giving the public firm guidance about interest rates and trying to stress the uncertainty about the path ahead. While they don't expect rates to get very high because of lingering headwinds to the economy, they also don't want to give the public too much comfort that they'll remain near historically low levels far into the future.

 

The Fed agreed "to emphasize in its communications the dependence of its policy decisions on the evolution of the economic outlook."

 

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Wed, 07/09/2014 - 14:15 | 4940383 order66
order66's picture

investors were not appropriately taking account of risks in their investment decisions.

Well, what are they supposed to do when 0% rates have been the new normal for over 5 years. There is no fear but...

Wed, 07/09/2014 - 14:18 | 4940391 PartysOver
PartysOver's picture

Paging Mr Holmes, Mr Sherlock Holmes, please meet your "No Shiat" party at the Mariner Eccles Building.

Wed, 07/09/2014 - 14:19 | 4940401 BC6
BC6's picture

Where can one get the audio tapes to learn John Hilsenrath's speed reading program? Or is it John Hilsenrath's speed reading program for kids who don't read so good?

Wed, 07/09/2014 - 15:37 | 4940687 Occident Mortal
Occident Mortal's picture

The problem with the economy is that inequality kills demand, the money with the fastest velocity is the money in the hands of the poor, they habitually spend everything they have. The money with the slowest velocity is the money in the hands of the rich they hoard whatever they can get hold of.

 

QE was an abhoration because it fuelled inequality, enriching those closest to the primary dealers. There was no trickle down wealth because by the time the wealth trickles down inflation has ripped any benefit to shreds.

 

The rich got richer and inflation scorched the poor, the result was 5 years of piss poor demand as monetary velocity collapsed.

Wed, 07/09/2014 - 17:08 | 4940970 Boris Alatovkrap
Boris Alatovkrap's picture

Timing is brilliance! Wait until economy is in death throws of downward spiral and when falsify metric is dictate, central bankster is delivering of fatal blow by quick rising of interest rate. If ever was perfect recipe for despotic overthrow of personal freedom and prosperity this is for thing sure! Maybe now citizenry is to wake up and realizing central bank is do bidding on behalf of bankster class and is care not for general welfare of citizenry!

Forward new global order!

Wed, 07/09/2014 - 14:21 | 4940415 tempo
tempo's picture

Tapering has little impact on liquidity as withholding tax increases has reduced funding needs and offsets tapering. Lots of liquidity to drive stocks to ATH by end of July. Tapering is tied to funding needs.

Wed, 07/09/2014 - 15:18 | 4940631 asking4it2k
asking4it2k's picture

The FED can taper because the FED told their "primary dealers" to buy US tresuries via EUROCLEAR in Belgium.

 

Its all one big scam !!

Wed, 07/09/2014 - 17:11 | 4940972 Jumbotron
Jumbotron's picture

Look for no serious rate hike until after the Presidential elections.  The Fed does not want the Obama Administration's wrath over giving them the outgoing legacy of blowing up the deficit and the debt partly through higher interest rates.

They'll wait until the first of 2017.  Then comes the "controlled" collapse.

Wed, 07/09/2014 - 14:16 | 4940384 NOTaREALmerican
NOTaREALmerican's picture

What is Belgium up to these daze?

Wed, 07/09/2014 - 14:18 | 4940399 Sudden Debt
Sudden Debt's picture

We lost the WK and now we don't want to play games anymore. We're taking a brake.

Wed, 07/09/2014 - 14:17 | 4940387 Chupacabra-322
Chupacabra-322's picture

"wars over man, Warmer dropped the big one."

Bluto's Big Speech - Animal House (9/10) Movie CLIP (1978) HD

https://m.youtube.com/watch?v=q7vtWB4owdE

Wed, 07/09/2014 - 14:17 | 4940388 bubblemania
bubblemania's picture

Bullish!

Wed, 07/09/2014 - 14:21 | 4940414 AccreditedEYE
AccreditedEYE's picture

Yes. There is nothing that would be seen any other way. People will never learn. Up, up and away.

Wed, 07/09/2014 - 14:21 | 4940395 Sudden Debt
Sudden Debt's picture

Aaahh... The public.... Servs...

When rates go up to 7 or 14%, we'll have a implossion like you won't believe and those with money will be able to buy everything on the cheap.

Why else do you think banks hoarded money like crazy?

Wed, 07/09/2014 - 16:33 | 4940862 daveO
daveO's picture

My money's on 20% inflation first.

Wed, 07/09/2014 - 19:51 | 4941435 Professorlocknload
Professorlocknload's picture

Yup, dave, they see it coming. Maybe a good time to lever up on some quality Real Estate. A 4% 30 year mortgage might look pretty good in a 20% plus inflationary world.

And I can't be the only one thinking that. Might get a bit get crowded in that sector in the near future.

Wed, 07/09/2014 - 14:18 | 4940400 JenkinsLane
JenkinsLane's picture

Because it's that time again:

 

Stop all the clocks, cut off the telephone,
Prevent the dog from barking with a juicy bone,
Silence the pianos and with muffled drum
Bring out the coffin, let the mourners come.

Let aeroplanes circle moaning overhead
Scribbling on the sky the message, QE Is Dead,
Put crepe bows round the white necks of the public doves,
Let the traffic policemen wear black cotton gloves.

QE was my North, my South, my East and West,
My working week and my Sunday rest,
My noon, my midnight, my talk, my song;
I thought that QE would last for ever: I was wrong.

The stars are not wanted now: put out every one;
Pack up the moon and dismantle the sun;
Pour away the ocean and sweep up the wood.
For nothing now can ever come to any good.

 

Wed, 07/09/2014 - 15:22 | 4940647 IANAE
IANAE's picture

apropos as I recall the deceased partied heartily to the very, sudden, end...

Wed, 07/09/2014 - 14:19 | 4940405 sbenard
sbenard's picture

The Fed's Whore-senrath!

Wed, 07/09/2014 - 14:21 | 4940411 Hohum
Hohum's picture

Why not give the public comfort that rates will remain historically low far into the future?  After all, they will.

Wed, 07/09/2014 - 14:27 | 4940429 deflator
deflator's picture

 They want people to go into debt now! "Rates have never been lower but don't wait--they can't stay low forever." ditech

Wed, 07/09/2014 - 16:32 | 4940858 daveO
daveO's picture

What one saves in interest will now be stolen thru price inflation + even more. It's the new, new math.

Wed, 07/09/2014 - 14:21 | 4940413 The worst trader
The worst trader's picture

Who would be buying in July and near all time highs? Belguim?

Wed, 07/09/2014 - 16:18 | 4940830 Ted K
Ted K's picture

It was the Brazil Coach, right when the index hit 7.

Wed, 07/09/2014 - 14:22 | 4940417 i_call_you_my_base
i_call_you_my_base's picture

And once again the market cracks up on bad fed news. Rigged for your perception.

Wed, 07/09/2014 - 14:26 | 4940430 madbraz
madbraz's picture

It's beyond farcical - just another NY FED mandated algo to ramp up and avoid a collapse after FED minutes, like clockwork.

Wed, 07/09/2014 - 14:30 | 4940447 i_call_you_my_base
i_call_you_my_base's picture

It is unbelievable. And after every one of these I'll hear this on NPR: "The DOW finished up over 100 points on FOMC minutes that show a continually improving economy." It's like clockwork. IMO, that's exactly why they do it.

Wed, 07/09/2014 - 14:28 | 4940438 RaceToTheBottom
RaceToTheBottom's picture

We can't continue without QE.   

I heard even gravity won't work without QE...

Wed, 07/09/2014 - 16:06 | 4940781 cougar_w
cougar_w's picture

They did the "oh we worried now" dance a year ago this time. We got "taper" but QE didn't end. Everyone knew it was a feint, a stab at shaking lose some dummies, but nobody bought it and market exuberance continued.

It's not ending this time either. Nobody is going to buy it. The Fed are trapped, that is why the last time was a lie, and this time is still a lie because nothing changed.

Oh but they'll end QE as-we-know-it. You bet. To much fanfare ... because they intend to move to other forms of "demand creation" (that is their real goal) that they are not telling us about. So the end result will be the same; Stocks up and market complacency. But without visible QE everyone will say "oh look the economy really must be better"

But it's not going to work, because they cannot create real market value or produce free energy for more growth. And because it won't work, they'll start to make shit up. We have entered a period of massive propaganda. It is going to be 24/7 bullshit everywhere all the time about everything.

The lies are going to become epic. They will just lie out-right and not worry about getting caught and not care what anyone thinks. There will be hungry, out-of-work mobs in the streets and they'll say unemployment is 3% and dropping. There will be highly visible massive TBTF bankruptcies and they'll call it healthy M&A, make up new corporate identities, nationalize corporations a la GM, whatever it takes. Corporations will be told up front to misreport their sales and inventories -- the SEC will fall asleep and never wake up -- and of course failing corporations watching their stock price will gladly comply.

You won't know if there is a problem unless you are a Board Director at a failing corporation waiting for the checks to bounce.

And when the checks bounce and everyone looks up from texting on their iPhone to see what that loud noise was, shit will disappear, like magic, nobody will say anything. Companies just vanish overnight, no reason given, no press release or merger or anything. Nothing in the news. Just there one day and POOF gone the next. Most people won't even notice. Anyone does notice, fuck them.

The controlled demolition is on. It will be a descent from altitude without landing gear, into the swallowing sea of human history.

Wed, 07/09/2014 - 14:28 | 4940440 madbraz
madbraz's picture

If this BS that the Fed is "concerned" carried any weight, you wouldn't see the NY FED lending $23 billion in treasuries per day and $144 billion in reverse repos. 

Wed, 07/09/2014 - 14:33 | 4940454 Madcow
Madcow's picture

The test of a first-rate intelligence is the ability to hold two opposed ideas in mind at the same time and still retain the ability to function.

F. Scott Fitzgerald

Wed, 07/09/2014 - 15:01 | 4940551 Dingleberry
Dingleberry's picture

Gee Fed....when rates are at multi-lifetime lows, and prices explode as a direct consequence....you gonna pin that on "investors"?

What a bunch of vile, lying asses.

Wed, 07/09/2014 - 15:27 | 4940562 TeethVillage88s
TeethVillage88s's picture

Something Wrong Here:

Where is Our Share of GDP Growth?

Gross Domestic Product
-2014:Q1: $17,016.0 Billion
-1979:Q4: $2,731 Billion

-35 Years of Growth= $14,285/$2,731 = 523% Growth
-$52,000-$46,000= $6,000/$46,000= 13% Increase in Household Income

Wow, lots of productivity Growth & GDP Growth for a Flat Income with 35 years of Inflation. Supervisors and Executives make tremendous gains for Out Sourcing Jobs and Automating.

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

Median Household Income in the United States
2012: $51,017 Dollars

Real Median Household Income in the United States
2012: 51,017 Dollars

Wikipedia shows 1980 wages $46,000 & 2012 $52,000

52-46= $6,000/$46,000 = 13% Increase in Household Income

https://en.wikipedia.org/wiki/Household_income_in_the_United_States#medi...

Income Gini Ratio
2012: 0.477 Ratio, 1979: 0.4, 1968: 0.38,

http://research.stlouisfed.org/fred2/series/MEHOINUSA646N

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

Wed, 07/09/2014 - 15:38 | 4940713 gcjohns1971
gcjohns1971's picture

Sooooooooo......

Rates will rise?

How high will that blow the deficit?

How will the Treasury manage to sell that much deficit spending - an increasing portion of which will be to pay the interest rate on PAST SPENDING?????

Will the Fed burn down their feeding barn?  

Or will they blink when the rates begin to rise and restart QE?

After decades of attacking the concept of private property, and a similar amount of time promoting 'Eminent Domain', I am betting they will blink.

One way or another.

And if they don't it will come in the form of another of their puppets declaring war on the US.

Wed, 07/09/2014 - 16:16 | 4940823 cougar_w
cougar_w's picture

Deficit? What is this deficit of which you speak?

They'll just stop reporting on the deficit, you'll never hear about it again, and within a year of that you'll forget it was ever an issue. And you'll never hear about budget battles either (except where these provide a media distraction that serves the politicians) nor trade imbalances nor raw materials stockpiles nor any other suspicious crap.

Just like the ChiComs do now, all that will just fall on the floor and be swept under the rug of the command economy.

I mean fuck, what do you think a command economy is about? It's about someone calling the shots, pal. All the shots all the time, every time. Anything that will benefit from being tightly controlled, will be controlled, and anyone doesn't like it can suffer a fatal freeway accident.

Deficit. Oh yeah that's funny. I got two legs pull the other one.

Wed, 07/09/2014 - 16:53 | 4940918 gcjohns1971
gcjohns1971's picture

Okay,

Here's the other one...

Anti-Dollar alliances forming lessen the demand for dollars- like as in no more Reserve Currency.

And/or (Dare I say it??) the PetroDollar ends.

That will send a lot of unwanted Dollar cash to the US.

What is it going to buy in sufficient amounts???? Except...

...Treasuries.

 

Oh... and just one more TINY thing.

EVERYTHING ELSE THAT CAN BE BOUGHT WITH DOLLARS.

Got Gold?

Wed, 07/09/2014 - 16:14 | 4940819 Ted K
Ted K's picture

Fascinating how ZH blog spends half its time crucifying MSM and then over 3/4 of the links and multiple huge paragraphs of "copy & paste" go back to WSJ and Bloomberg.

Circle-jerk ZH dittoheads, please congregate and discuss....

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