Dear Janet: Here Is The Circle Jerk You Have Created Explained In 54 Words

Tyler Durden's picture

On Monday in “When Doves Cry: Bedeviled By Dollar ‘Dilemma’, Trapped Fed Faces FX Catch-22,” we described precisely why the Fed’s new reaction function simply can’t work given prevailing market conditions.

The Fed adopted the so-called “clean relent” precisely because it knew that the strong dollar would, as Goldman put it, “go through the roof” at the slightest sign of hawkishness. Of course a soaring dollar would likely be more than enough to send the EM world careening into crisis as China’s new currency regime and depressed commodity prices have conspired to push commodity currencies to the brink. The resulting outflows and subsequent meltdown would almost invariably feed back into advanced economies forcing the Fed to do an embarrassing about face. Unfortunately however, US investors interpreted the Fed’s move to postpone liftoff as a sign that Yellen was worried about the economy leading directly to the worst possible outcome: risk off sentiment that triggered a post-FOMC selloff. In short: 

The new reaction function seems to involve sensitivity to both domestic and global financial markets. In the current environment where a positive assessment of the outlook for the US economy is required to keep a bid under risk assets (i.e. in an environment where good news is good news again) but in which EM is one "symbolic" Fed hike away from careening headlong into crisis, the new reaction function can’t possibly work. 


What the above should suggest, perhaps more than anything else, is that there’s a certain reflexivity to the entire thing and it’s especially evident when we look at how the Fed got itself into the current predicament. 

There’s a certain line of argumentation that says the Fed missed its window to hike and ever since, the uncertainty has only grown with each passing FOMC meeting. That uncertainty serves to perpetuate outflows from EM and now, the Fed is set to use those very outflows as an excuse for why it must postpone liftoff.

With that, we’ll close with the following concise formulation of the reflexivity problem from former Treasury economist Bryan Carter who spoke to Bloomberg:

”Short-end rates move higher as the Fed gets closer to hiking, and that causes the dollar to strengthen, and that causes global funding stresses. They are creating the conditions that are causing the external environment to be weak, and then they say they can’t hike because of those same conditions that they have created.” 


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chrsn's picture

I wish it were a circular firing squad instead.

UndergroundPost's picture

International Central Banksterism MUST be destroyed

NoDebt's picture

My brother would call this "pilot-induced ocillation".  Where the pilot, reacting too slowly or over-correcting on the controls makes the situation WORSE, not better.

I'd just say that the rape of the middle class is going splendidly.

two hoots's picture

There are times when a few words better represent a situation than all the charts and data (both manipulative) combined.  Not a replacement for dd.

aint no fortunate son's picture

A simple, elegant explanation and yet those idiots with the PhD's in obfuscation and bullshit are clueless

Keyser's picture

Bullish for tar, feathers and pitch forks...

kralizec's picture

Those 54 words are nothing new, they were baked into the cake that was the Federal Reserve Act of 1913, it's only in this latter modern era that the words have been more easily seen in action.

This atrocity cannot be can only be ended.

Miss Expectations's picture

So then I looked up Graveyard Spiral:

The pilot mistakenly believes he or she is flying with the wings level, but with a descent indicated on the altimeter and vertical speed indicator. This usually leads to the pilot "pulling up" or attempting to climb by pulling back on the control yoke. In a banking turn, however, the plane is at an angle and will be describing a large circle in the sky. Pulling back on the control yoke has the effect of tightening that circle and causing the plane to lose altitude at an increasing rate, like water swirling in a drain or funnel.

booboo's picture

increase angle of attack pick up speed and start over if earth allows, if the plane stalls get out and push start it, it is expensive to have one of those large airliners towed down from the sky;)

zorba THE GREEK's picture

A circle jerk is still better than a cookie cum.

indygo55's picture

I wish it were a circular firing squad instead.


With bent barrels and curved bullets.

Stuck on Zero's picture

Bring back Volcker.

Professorlocknload's picture

Now, there, see? Just when I was losing respect for the French, my faith is restored. Those Frogs knew how to throw a revolution.

booboo's picture

until the starters of the revolution got on Robspierre's shit list. "But I supported you" have been the last words of many useful idiots.

Ima anal sphincter's picture

Bring back sound money backed by something real. Not this frickin Monopoly money BS.

Damn, maybe I should break into the old game, take out some $500's and use them someplace. Tough sale, but if I explain that the gold one is really worth exactly the same as the green one...... Oh, me bad, the store owners don't know that yet :)

Fahque Imuhnutjahb's picture



Sorry sphincter, but there's a club, and you're not in it.  Gotta be chosen to be a "legal" counterfeiter.

You go off half cocked, on a cockamamie scheme, and your sphincter will be fit for cock in the hoosegow.

Bananamerican's picture

Bring back Volcker? "Sound money"?

He never left...

"That day the United States announced that the dollar would be devalued by 10 percent. By switching the yen to a floating exchange rate, the Japanese currency appreciated, and a sufficient realignment in exchange rates was realized. Joint intervention in gold sales to prevent a steep rise in the price of gold, however, was not undertaken. That was a mistake"

-Paul Volcker

pFXTim's picture

> Bring back Volcker.



Rastadamus's picture

I get it. It's a Daisy Chain. Bernanke eats Yellens pussy while Yellen chews on some other clit whose owner is sucking another banker's dick, who's tossingJaime Dimon's Salad, who is sucking Christine LeGaurde's dick, ect. ect. until eveyone has just drained themselves into someone else's gut. 
Yeah, it's really clear now. 

indygo55's picture

Im sorry but that image is just plain disgusting. But appropriate.


Implied Violins's picture

I was just about to eat dinner.

Now I have to re-finish lunch. thanx

OpenThePodBayDoorHAL's picture

Not many noticed that she introduced a perfect new goalpost-mover: labor force participation rates. She can ride that horse to whatever conclusion she wants, forever

booboo's picture

She can't juggle the narrative out of the White House of 5% UE and Feds "Unemployment is to high" bullshit at the same time...well, yea, anything has been proven possible by these folks.

Fahque Imuhnutjahb's picture

Watch closely and you'll see the kleptocracy slip in and steal the treat.

alfred b.'s picture


 Ground Hog Day!


Sudden Debt's picture

Can't or won't...

bankonzhongguo's picture

People like Old Yellin and the rest of their cocktail cronies forgot that their continued existence rested on an engaged and resourceful middle class.

Now by the Neocon Feds' sheer will to extract every drop of blood, oil and tears from the middle class, they will find themselves defenseless from the hoards of disenfranchised tinkers, tailors, soldiers and spies that once had a seat at the table, but now see their children whither before their own eyes while they frantically move back into their parents homes.

An entire generation of Americans will never work again after the age of 40 because of the gamed system pumped up by the likes of Greenspan, Rubin, The Bernak and Yellin.

No reason for that MBA, masters degree, continuing education. No reason to own anything when you can't. No reason to vote or even stop at a red light.

Those people remember what goods times were like and who is responsible from taking away their security but most importantly - their dignity.

It's not about money anymore.

Which is why their only "safety" are regimes like the TPP.

Sanity Bear's picture

Trying to explain economics to Fed-worshippers is like trying to explain logic to SJWs.

phoolish's picture

Who's that gray-haired hag?  Looks like someone I saw at the nursing home last week.  Could be.



Falling Down's picture

Probably smells the same, too.

phoolish's picture

Wait, the Bernank said rates would increase when unemployment hit 6.5%.  I guess he meant on the way back up to 25%?



all-priced-in's picture

Looks like the univeral sign for "down the drain"




Moe Howard's picture

Where's my chicken soup, bitch?

CHX's picture

You don't want to REALLY know that, do you ?

Keltner Channel Surf's picture

The Fed as a reflexive tautology, Schrodinger's rate hike chasing its tail, wearing out a circular path in this litter box of a market.

As they don't recognize postmodernism’s reflexivity, until they start watching Jean-Luc Godard films, reading Robert Coover/Thomas Pynchon or listening to Philip Glass, we’re screwed.  Or, put more simply, we’re screwed …

Tyrone Shoelaces's picture

It's a gigantic shit sandwich and everyone gets to take a bite.


CHX's picture

As the rest of the globe is fed-up, the FED seems more or less F-ed.

Thisisbullishright's picture

"You bask under the blanket of freedom that I provide, and then you question the way in which I provide it!".


Grandad Grumps's picture

Yes, she is an incompetent granny ... but that does not mean that the banks are not doing it intentionally, with her as their messenger.

Theft and fraud is what the banks do best ... except for murder through the creation of unjust wars, of course.

Tim Knight from Slope of Hope's picture

And to think this woman actually reproduced. I guess there's a certain logic to the whole hole-in-the-sheet thing. And I bet it was a small hole.

medium giraffe's picture

She'd seem a lot more credible if she shaved her growler.

Crocodile's picture

How about seeing Michelle come out of the closet (Michael Obama) by growing a beard.

nakki's picture

Don't ever mention Mrs. Yellen and circle jerk in the same sentence again. I was just sitting down to eat and have completely lost my appetite

black dragon's picture

why cant USA just start circulating RENMINBI YUAN into usa transactions.  just start giving change in yuan and take all fed notes out of circulation.  who would loose other than criminals

Loismustdie's picture

Extremely disengenuos to not recognize that she is merely a puppet. A willing puppet but still a puppet.

Crocodile's picture

A willing puppet whose job is to please the puppeteers; you get that when you sell your soul to THE DEVIL.



enloe creek's picture

I worked in a restaurant for a couple years. I was a naive hard worker and wasted alot of time doing my job. I make up for it now.  You can't win with a Hebrew football team cause they all just go try to get the quarter back