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PIMCO's Balls On The Fed: There Will Be No Escape From ZIRP
Last month, the vice president of the St. Louis Fed Stephen D. Williamson did a funny thing: he released a white paper which dared to suggest that Ben Bernanke was wrong about QE and that not only was there no demonstrable link between trillions in asset purchases and positive economic outcomes, inflation expectations have actually declined across markets where central bank asset purchases are largest in terms of GDP. Here’s the excerpt:
There is no work, to my knowledge, that establishes a link from QE to the ultimate goals of the Fed inflation and real economic activity. Indeed, casual evidence suggests that QE has been ineffective in increasing inflation. For example, in spite of massive central bank asset purchases in the U.S., the Fed is currently falling short of its 2% inflation target. Further, Switzerland and Japan, which have balance sheets that are much larger than that of the U.S., relative to GDP, have been experiencing very low inflation or deflation.
But Williamson - bless his heart - wasn’t done. He went on to note that central bankers who adhere, in a perpetual state of Einsteinian insanity, to the Taylor principle, will never be able to raise rates. To wit:
A Taylor-rule central banker may be convinced that lowering the central bank's nominal interest rate target will increase inflation. This can lead to a situation in which the central banker becomes permanently trapped in ZIRP. With the nominal interest rate at zero for a long period of time, inflation is low, and the central banker reasons that maintaining ZIRP will eventually increase the inflation rate. But this never happens and, as long as the central banker adheres to a sufficiently aggressive Taylor rule, ZIRP will continue forever, and the central bank will fall short of its inflation target indefinitely. This idea seems to fit nicely with the recent observed behavior of the worldís central banks.
Well as it turns out, Williamson isn’t the only one who thinks the Fed may have superglued itself to the effective lower bound because as Reuters reports, PIMCO’s Andrew Balls let it all hang out in the firm’s quarterly Cyclical Forum outlook report.
Here’s more:
"In contrast to robust consumption and housing, business investment confronts the headwinds from low oil prices and cutbacks in drilling and exploration, while exports will be challenged by the delayed effects of a stronger dollar and slower growth in emerging economies. There is a chance that the Fed, like a number of central banks in recent years, may find it impossible to escape the effective lower bound to which policy rates were cut during the dark days of the crisis some seven years ago."
So there you have it Ms. Yellen, straight from PIMCO's Balls: try as you may, there will be no escape from what Bernanke hath wrought.
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My question is this.....Will this go on for years...slow errode? Or will something happen and it implodes fast?
That, sir, is the million piece of shitty, worthless paper question.
Janet teabags
LOL, vinegar balls.
I wouldn't doubt her's smell like moth balls
gefilte balls
Monetary policy will not solve this problem. Time to take quarantine the FED and get on with repairing things.
Mole turds.
FORWARD TALPIDAE!
Did you ever smell moth balls?
Absolutely. Grandma had bad problems back in the day with a certain type of moth that loved being around cotton plants. Once they got inside....they loved snacking on her cotten linens.
They also make a pretty good cottonmouth repellent
Heh, sorry, that was a joke my late wife would tell.
After the person said "yes" she'd say: "How did you get their little legs apart?"
Q - What's a Myth ?
A - Female Moth - no ball smell
"quadrillion dollar question", you know, inflation. just like before (i.e. Weimar or Russia in 1988), the supply lines for essential commodities will simply break and you will not be able to buy anything regardless of the "official" price.
However, this time the lost of faith in fiat will occur on a global scale.
Hedge accordingly.
I figured as much.....it just seems as though EVERYTHING is on edge...Racial Tensions, A President that does nothing...48 million on food stamps. THe debt never eing talked about. ZIRP, soon to be NIRP...I keep stacking, and I am always aware. It just seems like sooo much is on edge. I wonder if it has always been like this? I wonder if it is because of the vast information we have access too that it just "Seems" like we are on edge?
Compare and contrast the Long Hot Summer to today. People are "on edge," if they are, due to the 24/7 news cycle you allude to, and due to the standard fussing and worrying of old people, who always need something to complain about.
If you listen to the MSM you don't hear squat about the public debt, the record inactivity rate, or the impossibility of making good on entitlements...the off books debt
So FUCK OFF with this story that its the 24/7 media that has people worried.
The president is doing plenty, and deliberately, to bring western civilisation down. If he had done nothing but play golf these last 6+ years we would be in much better shape.
I'm betting on an implosion, but it'll be like falling domino's where one domino pushes another over.... https://www.youtube.com/watch?v=ARM42-eorzE
The question is what triggers the first domino? Will it be one of these $ debt issues in some EM or the immigrant flood in the EU? The problem with so much fuel spread around the place is any spark will do.
What has been amazing is with all eyes on the FED, so many potential sources of heat have simply been ignored.
You already know the answers, don't you?
ZIRP will continue until NIRP
Yeah, what's this defeatist "no surviving ZIRP" bullshit?
Did people quit when the Germans bombed Pearl Harbor?
There's always NIRP!
Yes.
I see it like a leak in a dam. It could be a slow trickle for years, but add some other stress like a big rainfall and you have a medium rush then a fast collapse.
I used to believe we'd be Japan but the moral decay here seems to be accelerating the process.
Agreed. I keep trying to ignore an unanswered question in my mind: Will this moral decay make a global economic collapse look like a sunday drive in the country? I don't ask myself this question because i am rather certain of the answer. America has no common interest to keep it held together anymore. Even in your own neighborhood, you will find widely differing ideas and values such that America is sliced like a pizza and the poles are so opposite from eachother, no solution is currently available, not even war.
Well, there's always civil war. Was it jefferson or franklin? I can't remember which old fart said it but, expect civil war every 200 years.
"Will this go on for years...slow errode? Or will something happen and it implodes fast? "
Yes. If Trump is elected. Go!
Bloomberg Trump or Bernie.
Dear Mr. Yellen ...FUCK OFF.
Duh.
"So there you have it Ms. Yellen, straight from PIMCO's Balls" yea but what do Yellen's balls say?
LOL. Way to go out on a limb PIMPCO.
Nine years running since the last FED rate hike (June 2006).
Is Andrew Balls related to Deez Nuts?
Nuts/Balls 2016!
Shh, quiet negotiations are underway on a partner for the ticket.
Nuts/Balls 2016! "We'll make sure everyone has a pot to piss in"
"We'll make sure everyone has pot to smoke"
It isn't like they ever keep a single promise. Oh Odum$hyt DID promise higher utility costs and it has happened, and that fundamental change thing too.
Yellen's balls have got to be getting a little more sweaty with each passing day.
Correct. However, this time around it will be global Weimar!!!
"headwinds from low oil prices"
Wait... what?
Malinvestment 101: Energy was the last capital good to provide a positive ROI, so that's where all the money ended up until supply vastly exceeded demand, undermining the ponzi.
Now there's nothing left to financialize except the currencies themselves.
Uhhmmmm, no shit.
A long time ago when I was a kid my Dad couldn't get the car started. He tried for a while then just turned off the key and sat back. When I asked him why he stopped giving it gas, he said "Engine's flooded. Just have to wait for while. Nothing else to do".
US economic engine (and EU and japan etc.) is flooded with debt. Just stop trying to start it and let this shit evaporate.
Or keep giving it gas. Whatever.
I believe the FED will try the option number 2 for a flooded engine:
2) Just stand on the gas petal until you pump so much gas into the system that everything opens up (OK Car jockeys, don't barrage me with the technical things that are happening in the carb/fuel injection), it is used as an option.....
If you think ZIRP is bad, wait till they try NIRP.
The FED has been talking about raising interest rate for *years* now. Next month, next quarter, next year. Our awsome economy is doing so well that they are just about ready to raise rates.
Get your rat asses back in here and buy the fucking dip you dirty fuckin' rats.
fwiw, Minneapolis FR president Kocherlakota - now an uber dove - said pretty much the same in a 2010 speech. He QUICKLY changed course back then (no doubt a phone call from bernanke played a role)
Would those be hairy sweaty balls on Yellens head?
They really have lost control.....that is the big problem....they control nothing...
They never had it. All they've ever had is massive amounts of influence that could undermine any problem spot. Thing is, you can only add so much energy to a pendulum before the fucking thing shatters.
All this "lack of" control sure has been good for the 1 percent's wealth accumulation.
The Fed is trying to push the pendulum up while it truly HAS to go down!
Overheard at the discount window:
**knock knock**
Fed: Who's there?
Balls: Balls
Fed: Balls who?
Balls: Balls in your mouth
You have that kind of setup and you fail at comedy this miserably?
I reject your comment. Please hang up and try again later. And be funny then.
Well, it made ME laugh. Even Robby laughed.
once all the involved parties wrap themselves around this new reality,then the quicker we can get this current mess over with...step it up,boys.
How has this continued for so long? But some small incident will trigger a chain reaction until all hell breaks loose.
http://www.bloomberg.com/news/articles/2015-09-22/chart-watchers-zero-in...
Chart-Watchers Zero In on More Warning Signals for U.S. Equities
by Anna-Louise Jackson
September 22, 2015 — 12:00 AM EDT
- Technical analysis patterns suggest further weakness ahead
- Head-and-shoulders, Dow Theory point to shifting trend
Equity investors rattled by last month’s correction, the prospects for the global economy and the Federal Reserve’s interest rate policy can add a few more reasons to worry.
Several technical charts are sounding warning signals that the worst of equities turmoil may not be over. So is the market headed toward another selloff? It may depend on how much stock you put into such omens. Some investors see technical analysis as only so much voodoo, claiming past market patterns give no insight into future movements.
The latest signals come after Wall Street early last month was fixated on another chart -- the “death cross,” in which the 50-day moving average of the Dow Jones Industrial Average fell below the 200-day average. The two lines crossed on Aug. 11, and less than two weeks later the gauge dropped 10 percent in four days for its first correction since 2011.
With that in mind, here’s what the chartists are seeing in the latest batch of data:
1. A downward sloping neckline in a head-and-shoulders pattern:
The Dow this year has formed “probably the most famous pattern in technical analysis” -- and it’s not particularly encouraging for stock bulls, according to Murray Gunn, head of technical analysis in London at HSBC Holdings Plc.
A so-called head-and-shoulders pattern is a formation comprising two peaks separated by a higher peak. This particular one -- marked by shoulders in March and July and a head in May -- could be “the first crack in the dam” and is special because of the rarity of its downward sloping nature, he wrote in a report Monday.
“It’s a bearish pattern which could be signaling a new bear market trend,” Gunn said in an e-mail. Investors should watch for increasing volumes on down moves in this benchmark index as the next indication that sentiment is becoming more negative, he said.
If the Dow -- which climbed 0.8 percent to 16,510.19 Monday -- were to trade above 18,137, a level last seen in July, that would provide more optimism, he said. Otherwise, “a new long-term and potentially powerful bear market has started; one that should end below the 2009 low.”
That low, on March 9, 2009, was reached after a head-and-shoulders pattern occurred during 2007 and 2008 at the start of the financial crisis, HSBC noted. The date marked the beginning of the current bull market.
2. Dow Theory sell signal
The signal that’s “causing the most angst” for Jeffrey Saut, chief investment strategist at Raymond James Financial Inc., in St. Petersburg, Florida, is one that happened last month.
When the Standard & Poor’s 500 Index fell to a nearly 10-month low on Aug. 25, two other indexes were below an October 2014 low that many chart watchers were closely monitoring. The Dow Jones Industrial Average and Dow Jones Transportation Average both breached this level, flashing a so-called Dow Theory sell signal. Such a signal occurs when the industrial and transport indexes fall below the low of a previous selloff.
What’s behind this angst? There’s only been one false Dow Theory signal in the last 18 years, Saut wrote in a report Monday, which gives him “cause for pause.” There is reason for optimism, he said, because that one false signal came in May 2010 during the so-called flash crash -- the last time the 30-stock gauge lost 1,000 points intraday, until it happened during the market upheaval in August.
Saut said he hoped this latest signal will prove faulty as well, but that if these two gauges breach their Aug. 25 lows again, this “suggests a change in trend that must at that point be honored.”
Another reason for optimism: the S&P 500 has yet to breach its October 2014 trough. True, that index has nothing to do with Dow Theory, Saut points out -- chartists may want to create a new theory.
It is very apparent to me that the FED will schedule an emergency FOMC meeting and announce a .0125 rate increase in order to say they did, in fact, raise rates. This fairly quickly followed by dropping rates by .0125 and announcing QE4 in response to a deteriorating American and Gobal economy.
Yep. I thought this would happen last week.
Yep, as Peter Schiff stated,Janet yellen threw out the possibility of 0% rates forever, as if the Fed owned the whole bond market. How arrogant. He and others are confident a currency crisis is dead ahead in which the Fed will have no other choice but to raise rates. When the fed loses control we have free markets once again.
Pimco Teabags Yellen.
Fixed it.
With my nuts on your tonsils /
While you're onstage rapping at your wack-ass concerts
In my mind, this had nothing to do with interest rates. Alas, I kept reading and found out that Balls was a person. Probably a distant cousin of presidential candidate "Dees Nutz."
Actually, there is ONE and Only ONE solution....
Complete Debt Forgiveness Worldwide.
One Big Freak'n Reset !!
Remember this is a Jubilee Year....
Thank goodness for the Hebrews and their Holidays !!
Why would TPTB do that? They can just default.
They can create everything but DEMAND
REAL Demand NO - FAKE Demand YES - They have been doing it with USTB's for years now !
Sorry, but Mother Nature don't take any wooden nickels!
What happens with all the UST the FED owns if it raises rates?
What happens to the GOV debt if the FED raises rates?
What happens to bond funds, MBS, and pensions if the FED raises rates?
I think it has to do with the answer to these and other questions.
NIRP is a kind of 'escape' frpm ZIRP, just not very sustainable....now going deep down the rabbit hole.
"So there you have it Ms. Yellen, straight from PIMCO's Balls: try as you may, there will be no escape from what Bernanke hath wrought."
Who, just like Greenspan, retired at just the right time!
You can't escape if you are unwilling to take some pain in terms of falling asset prices which they are not.
To the Fed: The spiked walls are STILL slowly coming together, prepare to be perforated!