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The Fed Is Running On The Final Fumes Of Its Credibility
Submitted by James H Kunstler via Kunstler.com,
Janet Yellen and her Federal Reserve board of augurers might as well have spilled a bucket of goat entrails down the steps of the mysterious Eccles Building as they parsed, sliced, and diced the ramifications in altering their prior declaration of “a considerable period” (that is, before raising interest rates), vis-à-vis the simpler new imperative, “patience,” with its moral overburden of public censure aimed at those too eager for clarity — that is to say, the assurance that the Fed will not pull the plug on their life-support drip of funny money for the racketeering operation that banking has become.
The vapid pronouncement of “patience” provoked delirium in the markets, with record advances to new oxygen-thin heights. Behind all this ceremonial hugger-mugger lurks the dark suspicion that the Federal Reserve has no idea what’s actually going on, and no idea what it’s doing. And in the absence of any such ideas, Ms. Yellen and her collegial eminences have engineered a very elaborate rationale for doing nothing.
The truth is, they have already done enough. They have succeeded via their dial-tweaking interventions in destroying the agency of markets so that nobody can tell the difference anymore between prices and wishes. Coincidentally, it is that most wishful time of the year, especially among the professional money managers polishing their clients’ portfolios as the carols are sung and the champagne corks pop. Ms. Yellen should have put on a Santa Claus suit when she ventured out to meet the media last week.
Not even very far in the background, there is wreckage everywhere as events spin out of the pretense of control. Surely something is up in the Mordor of derivatives, that unregulated shadowland of counterparty subterfuge where promises are made with no possibility or intention of ever being kept. You can’t have currencies crashing in more than a handful of significant countries, and interest rates ululating, without a lot of slippage among the swaps. My guess is that a lot of things have busted wide open there, and we just don’t know about it yet, like fissures working deep below the surface around a caldera.
This Federal Reserve is running on the final fumes of its credibility. Counsel “patience” as it might, other institutions and the people running them may run out of patience with it and start running for cover. When currencies catch fire, even a run on the bank becomes an exercise in futility. The rot is spreading from the margins to the center. In a world of oxidizing paper obligations, the paper dollar is hardly a fortress but more like a stack of empty foil-wrapped boxes displayed in the concourse of a shopping mall scheduled for closure as soon as the holiday is concluded. Maybe some wise-ass kid will just torch it. The security guard is still awaiting his previous paycheck and is out drinking by the dumpster.
It will be at least a couple of months before the Fed dares to start “printing” again and a lot can happen before it does. If and when it does resume QE — and it will be sorely tempted — all its credibility will finally be lost. What an opportunity for another country, say a country with an already foundering currency, to dare introduce money partially backed by gold. Could happen. That hypothetical nation may be one with, say, substantial oil reserves, something that even an economically depressed global industrial economy desperately needs. That hypothetical nation may be one that is very weary of being jerked around by the USA, with our augerers and vizeers, and haircuts-in-search-of-brains.
Merry Christmas everyone and, this dwindling year, be especially careful what you wish for.
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Russia will default on worthless Fed paper in 2015.
What credibility?
Yep, the Federal Reserve is full of crap.
"It will be at least a couple of months before the Fed dares to start “printing” again"
Is it possible to maintain ZIRP without 'printing'?
You are right, they never stopped.
Just saying you did does not mean that you did. One easy way to tell, it has not collapsed so they must still be printing.
End of story.
Free the Slaves !
I thought to myself, what a stupid fucking headline. Who would be so ignorant as to just now notice that the Fed has long ago exhausted any and all of its credibility?
Why two-time Obummer voting Kunstler, that's who!
Why do statists such as he insist upon remaining in full-retard mode, when the subject matter of his articles should make it blatantly obvious that the system he's critiquing is nothing but an organized crime syndicate? Is this logic really that hard to understand?
So, what does he do? Why defend the system, of course! If only "we the people" regain control of the gun, everything will be fine.
Is it beer-thirty yet?
Agreed. More to the point, does it matter if they have credibility? If they crank up the presses, the dollars are still going out there. You may not like it, but that's still what happens. Loss of credibility might make things more complicated to front-run them, but makes no difference to the policies they impose.
Credibilty is for the weak, the Fed has magic computers instead....
I agree. You don't have to believe in the Fed, to believe that when push comes to shove, the Fed will do the only thing that it can do.
What credibility?
You know, all the credibility they gained by murdering, imprisioning, enslaving, looting and mocking everyone on the planet who goes against their system.
The Fed will always have credibility. They will point out that it was just something, no one, including them, could foresee or overcome. It was Congress' job to not spend so much they will say. Remember Bernanke's press confrences? 'Monetary policy is not a panacea'. And the prez, of either party, will blame Congress too, "I sign the bills, they have to pass them.' And each Congress critter will have lists of spending he voted against.
America and the world is screwed.
I will be right behind them
Remember....Mr. Yellen said that patience on an interest rate climb was a couple of meetings.
That puts the Fed's FINAL chance for credibility towards the end of April. Then it's shit or get off the pot.
if their credibility was running out...why are we seeing more ATHs today? i'd argue the contrarian. their power is actually gaining. in 2008 when they said they would rescue the mkt...we sold off. now 1 word in a memo and couple sentences in a speech have rocket the mkt up 7% each time. you ain't seen nothing yet. i think we see s&P 3,000 in the next 12 to 18 months.
Takes more dollars to purchase this crap....it will spread to other items.
Like Salmon.
Shrimp.
Ground Beef.
All the other shrinkflation you see in the groceries.
Simple as that.
isn't that why they are buying gold like crazy?
US Dollar is meaningless. The rest of the world is moving away from it. And, b/c there isn't another "world currency" in place, they are using gold to back their currency(ies). Russia, China, Swiss and others are moving away from the Dollar.
If I were a gambler I'd buy Rubles, Yen and russian/chinese stocks, the East is rising and the West is imploding. But, it's a scary landscape. The assholes in DC and Europe are willing to go to WWIII rather than let their hegemony collapse.
Death to all bankers.
Is this a reprint from 2007?
They said the same thing last year, and the year before that. I suspect bloggers will be saying the same thing next year and mayber the year after.
But this year ALL the systems required to dethrone the USD are in place.
So it is different this year.They will pull the trigger but only when its most advantageous to them.
Tick tock
"it's different this time" ;)
How can you possibly say the Fed is running on fumes of credibility when every day the market demonstrates that it both hangs on every word out of every Fed governor's mouth, and is willing to take at face value everything they say? This is just wishful thinking on the part of a disgruntled idealist who wishes things weren't so corrupt and that the bankers weren't winning their battle to take over everything in a walk.
Not sure why you're getting down-voted for that. I think its dead-on.
Other disgruntled idealists who don't want to deal with reality.
A disappointed idealist is a cynic. And please don't forget the difference between 'reality' and truth. Big difference.
OK, OK, since I like both you guys I'll fess up that it was me. Al I gave you maybe the sixth red arrow I've ever given you on this site - NoDebt usually I would upvote you just for the avatar. Usually I'm a fan of you both.
But I had to give you both reds this time. You guys are both hanging on "the market" as though IT has any credibility. The market may be a lot of things, but 'reality' it isn't.
You guys need to step out of the matrix. You've begun mistaking it for 'reality'. The Fed has credibility because the market is up? That may be the way a trader thinks, but traders these days aren't much in touch with what's going on (in reality, that is, speaking of the real world) - not if they're still waiting on the Fed or the 'market' to tell them what to think.
The 'market' is becoming less and less relevant as the real economy (yes, it's an ongoing depression) asserts itself. The 'market' these days is nothing but the Fed's propaganda arm, and it's a fragile one at that. More of us are waking up to how fake both these institutions are. Next you'll be saying that the USD is strong because people want it all around the world! (Parm me, 'cleanest dirty shirt' or some such.) Oh, and NOBODY wants PMs, not at any price!
Hence, red arrows. I almost automagically green you most of the time, but It's Different This Time and since you asked, and since it was you, figured I might as well explain it!
(PS: Well, you may be right that I'm 'disgruntled', though...! Which is bad (I guess) but not as bad as the alternative... gruntled is a bad place to be these days.) Damn, I remember when reds were a badge of honour at Fight Club.
Sorry to ruin your polls but you guys have heaps of greens, you can spare the odd red now and then...keeps y'all humble!
+1 for the analysis and for manning up and explaining the reason for junking Al and NoDebt.
It would be more appropriate to write an article titled Most human beings have no idea what a central bank is nor what a fiat currency is, so prepare yourselves for the inevitable collapse then go have a beer.
"Credibility"? With whom? We all know the game is rigged so they never had credibility with us. The Wall St goons nurse off of the FED teat and don't even think of nor care about credibility. So who the fuck is he talking about?
Do you really think that the Asians and Russians are waiting for every word from the FED?
Sure they are, it's their favorite sitcom....
Correct. I would add only the market hangs in not only on every word of the exisiting FED members but even Mr.Bullard who is a former governor from Mid West (not even NY).
Even Martin armstrong is retreating nicely and moving his forecast of 2015.75 to sometimes in the future. To quote from him today:
"It appears that the timing is rather good since we have BIG BANG starting in October next year and thereafter we will see the impact unfold especially for the first 2 to 3 years into 2017-2018 culminating by 2020."
So... what's new here?
Ms. Yellen should have put on a Santa Claus suit when she ventured out to meet the media last week.
An elf costume would be more appropriate...
The Great Swami says: September 15th, 2015
...be especially careful what you wish for.
Sure. Back a currency with gold valued at $55,000/oz.
in your sweat dreams only
OK then don't back it at all. Let's wait for the physical market to destroy the paper market just like in USD crises previously.
When old Yeller was givimg her press conference I swear she was watching each market tick as he spoke. She kept pausing and glancing to the side after each statement making sure she didn't blow something up.
Old Yeller, Evans, Williams and Dudley look at the stock indexes contantly like Clinton and Obama look at the polling numbers.
Gotta remember, all they care about is the market. To them the real world is a fantasy derived from massive amounts of Hopium.
What do they do with Old Yeller at the end of the movie after they realize she is crazy?
Dovish is the new black.
good article.. but for one point, an important point I may add:
this isnt ignorance or stupidity. this is purposeful. in a world where everything is largely scripted theater.. its naive to assign the shananigans to stupidity, or mis handeling.
duh P < P + I
My guess is that a lot of things have busted wide open there, and we just don’t know about it yet, like fissures working deep below the surface around a caldera.
Agree 100%!!
"Patience" was a code word. It must be. Who would say something like that?!?
Translation of "patience": "For those of you who understand the graveness of the situation: start heading for the rescue boats now, while the band is still playing and the people are still dancing"
I been keeping cash wrapped in an ammo box buried out in a secure place. Plus some in another accessible hidden place.
If this sucker goes down, they will kill the ATMs; having ferns on hand for a short time will help, IMO.
Agree, cash is likely to work for transactions until either: (1)it becomes apparent a new currency is forthcoming; or (2) .Gov goes bust entirely. In this event, you're left trading hard assets for hard assets, or blowjobs.
If the masses weren't so fucking stupid and preoccupied with i-phones and Kim Kardashians ass, they might be able to mount an offensive, or at least an objection, to the Feds reckless behavior. But alas, no suck luck.
Yep, the masses are fucking stupid, and that is just the way their rulers like it!
They'll shut down the news. Take over the food production and distribution. Why ... it will be just like Venezuela!
got TP?
So...start one.
The West has already shown Russia how powerful it can be to manipulate the markets. Russia took the first big punch but is still standing. Do not think for a minute that Russia will not punch back - only this time the punch will hit the famous 'Glass Jaw' of US Markets. For only a few billion dollars, in the right places and in totally legal accounts, the Russians could take down global financial markets.
so, they had credibility to begin with?
"running out" would suggest their initial position was to have some.
im still waiting for someone (anyone) to explain to me how its normal AND non-inflationary to purchase your own debt with money that doesn't exist. how that is not the definition of "creating money out of thin air" is way beyond my comprehension. then again, im a simple man, not a smart man. im also the same man who asked:
1. back in the late '90's, early 2000's "how do internet stock that create NO money what-so-ever do NOTHING but go straight-up without anyone asking any questions. result = crash.
2. in 2007 i asked "how do people making $50,000 a year qualify to purchase $1 million holmes. result = crash.
so i've been asking my 3rd question (regarding purchasing of our own debt) and i still get the same answer from ANYONE i ask whether they are in the banking/hedge fund industry, small business owner, guy on the street, cab driver, pizza/bagel/chinese food place, family, friends, etc. same answer i get = dumb-ass look on their face MEETS deer in headlights.
The un-fed can not stop doing what they are doing, the die is cast. They are the market, trillion upon trillons worth. Once you paint yourself into a corner there is no easy/painless way out.
Decades ago you rarely heard a word from from that small group of private bankersters. Now days they jump out in front of any available camera. Wide open in your face super rigged market. That can go on a long,long time.
Until it doesn't!
I still truly believe that they'll cover this debacle with a false flag. They can't possibly be on the hook for bringing in the world's economy to its knees, because they want to be part of the solution for the next round of fiat.
No, I think they have a surprise for us. I think that the Sony hack is a false flag to establish buy-in for the BIG banking cyber attack or grid failure to come. I pray I'm wrong, but this whole thing smells fishy to me...
Grid failure would accomplish a lot for the Failed Fedcoats. They could immediately use this cover to commence the bank holiday and freeze all American financial assets. Then it would be over to FEMA/DHS to dole out emergency food, and Krystallnacht all the ZHers. Finally, the Goldman Sacks Fed could gloriously roll out the new global Kwacha currency, not to be confused with the old Namibian Kwacha. Each bill would have a diversity rainbow on it, with the head of Preezy riding a unicorn. Conversion between the new Kwacha and the old greenback could be anywhere from 10 to 10,000 to 1 Kwacha.
What is this Kwacha stuff? My sources tell me it's going to be Kwakioodles or SDR's or something like that from the IMF. But your suggested ratios are correct.
My asociates and I were just debating the next possible false flag event last night over too many x-mas drinks, when my 16 y/o said out of the blue "it would have to be big enough to erase any data/debt of the people with the most to lose - say a cyber attack!"
We asked him to elaborate... "Debt accounts from effected systems would have to be forgiven, the internet shut down leaving only MSM news, everything the Government & banks need for a reset."
From the mouths of babes.
Credibility has nothing to do with it.
The dealer, the shills and the runners all know it is all a big three card monte. Savy street players also know it is a black and red card con but will play until the music stops.
And that is all this is about. Catching the wink that signals the music is about to stop and grabbing the cash off the box before the mob catches on.
That's true for the insiders and those who know that this is a game. (Too) many others buy into believing what they are told, even if it doesn't square with what they can observe directly.
People believe guns are evil, not getting a flu shot is sure death, and taking huge loans for a college education is a good choice. All of which comes from sources they find more "credible" than some basic research and their own reasoning. And so, the feeders of the masses maintain credibility.
i think all 3 of u guys are right. they are so far deep down this rabbit hole, they HAVE TO keep going. next stop will be announcing that they are just straight-up buying stocks but that will come only:
1. after the next crash (if they even allow that to happen)
2. congress gets authority to audit the fed (i mean, imagine if we did & found out they are long 1,000,000,000,000,000 SPY, 1,000,000,000,000,000 DIA, 1,000,000,000,000,000 EEM, 1,000,000,000,000,000 QQQ, etc.
the only time in the past 6 years anything gets passed in congress is when stocks are cratering (ie. TARP, launching of QE). democrats NOR republicans wanted to or will want to be responsible for ending this party & taking away the booze, drugs, etc. because we've been consuming all of it for 6 years now the hangover is going to feel like getting hit by a bus and that means DJIA > 10,000 and NOBODY wants to see that.
Tricky one, but true.
They have succeeded via their dial-tweaking interventions in destroying the agency of markets so that nobody can tell the difference anymore between prices and wishes.
One of the best lines I've read in a while.
The fed will continue to lie and the mainstream news will let them get away with it.
Wall street banks pretend everything is OK until bankruptcy is upon them.
Remember 2008.
When it all goes wrong ...... just change the rules.
When you make the rules you can do anything ..... just mint a couple of trillion dollar coins and all debts are paid .... maybe quadrillion.
you mean the final fumes of corruptability !!
the time is short for FED BANKS
then the gallows
They shoulda never gave you niggaz money (or allowed them to print it). https://www.youtube.com/watch?v=Fb6n_nT8eLY
You mean the Fed still has fumes of credibility?? That comes as a surprise, cause I was thinking the Fed has no credibility at all.
If rigged markets was the goal, then they would have 100% credibility.
"This Federal Reserve is running on the final fumes of its credibility."
The Creature from Jekyll Island will destroy itself as predicted and described here quite a while ago...
http://www.globaldeflationnews.com/the-creature-from-jekyll-island-the-e...
What? The FED has credibility..."Wall Street Cred"....they will do what they are told!
I hope Greenspan lives long enough to see what his American exceptionalism did for the Western World.
Scientists are confident that if kept well watered, you can grow asparagus on Mars.
Which scientists?
They do realize water turns to ice below 0C.
“Behind all this ceremonial hugger-mugger lurks the dark suspicion that the Federal Reserve has no idea what’s actually going on, and no idea what it’s doing.”
Ah, let me remove that suspicion.
During the week ended Dec 5, the FR sold exactly $5 billion of Treasury securities in a single transaction. At the time such securities were legally earmarked as collateral for issued Federal Reserve notes (the scrip you and I carry in our pockets). Hence, the trade was illegal. But let’s overlook this technicality for the moment. The market had to pay for these securities with currency, bank reserves or expired repos (plus one or two other minor options). As it turned out, banks had to borrow $3 billion from the FR to offset what the FR drained by the sale.
By this single transaction, the FR caused $5 billion of collateral behind issued currency and $3 billion of bank reserves to disappear.
The following week the FR sold another $5 billion, exactly, and, as a single transaction. Total borrowings by banks was bumped up to $5 billion.
The next week (Dec 19), the FR sold $15 billion; bank borrowings: $25 billion.
By this series of transactions, the FR simultaneously caused $25 billion of currency collateral and $25 billion of bank reserves to disappear. And to trigger the financial slaughter that continues to this day.
Now, if you are tasked with maintaining a stable currency and calm in the banking system, these sales of Treasuries were inexplicable, to say the least. And they lead to the question, ‘When did crooks and idiots capture the FR?’
This sequence of events went without notice by the main stream media and most financial observers; which is most alarming; for, these actions of the FR eventually resulted in a situation where issued currency was only 54% collateralized (April of 2009).
What are we supposed to think when those trusted to safe guard the gold (Treasury securities), instead of precipitating financial crashes with it?
In my opinion, FR bureaucrats and their puppeteers know exactly what they are doing.
Deliberate effort to induce an deflationary crash. Nice. When will it come through to the stock market and housing. I mean if they want real pricing and real markets let's see it across the board, eh?
When they raise, or lose control of, interest rates will be the next trigger. Then the slaughter will occur across all markets (except food), across the planet.
.gov can never really hold another part of .gov accountable or we wouldn't have many three-letter-agencies and vast swaths of the federal state. The miliary has become just another warfare welfare for those who think they are protecting our national security rather than their status quo.
Question:
Is it primarily the bankers or primarily the govt that is running the show and why do you think so?
My answer: the govt, because they have the guns, and I don't often see politicians being prosecuted, fined or punished.
Fed lost credibility long, long ago in the discerning mind.
The useful idiots will never let them lose credibility lest their world view of the savior Fed will collapse.