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Cacophony Of The Clueless - FedSpeak Reaches Peak Confusion
Submitted by Pater Tenebrarum via Acting-Man.com,
Cacophony of the Clueless?
A friend just mailed us a few items that were posted at Zerohedge today as they came over the wire services. As is by now a well-worn tradition, individual FOMC board members (both members of the board of governors as well as district presidents) are delivering speeches and interviews galore in the wake of the most recent rate non-decision.

Superficially one gets the impression that they aren’t really trying to “explain” anything to the hoi-polloi, since it all sounds remarkably uncoordinated. Today Bill Dudley (GS emissary at the NY Fed) and Charles Evans (Chicago Fed überdove) piped up, which reads as follows in the above mentioned summary by the wire services:
DUDLEY: HE EXPECTS FED PROBABLY WILL RAISE RATES LATER THIS YEAR
DUDLEY: THAT’S NOT CALENDAR GUIDANCE, THAT’S DATA-DEPENDENT
DUDLEY: FED RATE PATH WILL BE SHAPED PARTLY BY MKT REACTION
*EVANS: BEST APPROACH IS FOR LATER LIFTOFF, GRADUAL TIGHTENING
*EVANS SAYS `EXTRA-PATIENT APPROACH’ TO TIGHTENING IS WARRANTED
*EVANS SAYS `THERE IS NO PROBLEM IN MODERATELY OVERSHOOTING 2%
*EVANS: APPROPRIATE TO RAISE RATES VERY GRADUALLY AFTER LIFTOFF
*EVANS SAYS HE SEES SUBSTANTIAL COSTS TO PREMATURE RATE LIFTOFF
Apart from the bewildering factoid that Mr. Dudley seems to think the phrase “end of the year” has nothing to do with the calendar, the two gentlemen seem to contradict each other. One of them keeps pretending that a rate hike remains “imminent”, while the other is telling us that after abandoning its employment rate guidance, the Fed should ditch its “inflation target” guidance next.
After all, we’re in a never-ending “emergency”. It evidently hasn’t occurred to Mr. Evans just yet that the policies of the organization he’s a member of may be directly responsible for said permanent state of economic emergency.

William Dudley, the emissary of Goldman Sachs at the Fed
Applied Kremlinology
So what to make of these seeming contradictions? Donning our hat of well-trained Kremlinologists, we will try to explain. First of all, one needs to keep in mind what the Fed’s policies are based on. As we have recently discussed, we agree with Professor Salerno’s analysis that is all rests on a foundation of Fisherian “price stabilization policy” (the disastrous policy that was inter alia responsible for the 1920s boom and the subsequent depression), topped up with a heavy dollop of Keynesianism and a sprinkling of Monetarism. All of this has been well-stirred and modern-day monetary policy is the result.
Various FOMC members have different preferences with respect to the theories contained in this mixture, but the upshot is that it is a given that the Fed will as a rule err on the side of easy money at every opportunity (there is a persistent myth that former chairman Volcker was somehow different, which even laymen can easily dispel by simply studying the money supply growth rates accompanying his reign).
This preference for easy money is largely owed to the nonsense made popular by Keynes (he didn’t invent any of it, but he sure popularized it and gave it a scientific gloss) – such as the fallacious “paradox of thrift” (thoroughly debunked long before Keynes even entered the scene) and the associated erroneous belief that spending and consumption are driving economic growth. Hence, central banks are supposed to manipulate the money supply and interest rates so as to spur “aggregate demand” (in essence these ideas were first formulated by John Law, who implemented them to truly disastrous effect). This is of course the functional equivalent of putting the cart before the horse.
However, the imperatives of Fisherian price stability policy can at times interfere with the urge to keep monetary policy as loose as possible, and the comments by Dudley and Evans have to be seen in this light. Below is a chart of the annual rate of change of CPI:
CPI (not seasonally adjusted) y/y change rate – as of August, it stood slightly below a mere 0.2%, via Saint Louis Federal Reserve Research – click to enlarge.
What both Dudley and Evans are presumably well aware of is that the recent CPI reading near 0.2% y/y is highly likely to soon give way to much higher annualized change rates. The reason for this is the so-called “base effect” – the huge decline in energy prices that took place a year ago is no longer going to influence the data in the final few months of this year.
We suspect that Dudley therefore concludes that it is necessary to prepare the markets for the possibility that the Fed will have to at least implement a token rate hike (whether it likes to or not), as higher CPI readings will rob it of a major excuse for keeping ZIRP going.
Evans by contrast is proposing to construct yet another excuse in line with his well-documented dovish inclinations, by proposing to “temporarily” ditch the price stability target when this happens.
Conclusion
To the extent that the messages are contradictory, they merely reveal the literal impossibility of central planning – neither Dudley nor Evans can possibly know at what level short term interest rates should be set. Ben Bernanke remarked in one of his early blog posts:
“The best strategy for the Fed I can think of is to set rates at a level consistent with the healthy operation of the economy over the medium term, that is, at the (today, low) equilibrium rate. There is absolutely nothing artificial about that! Of course, it’s legitimate to argue about where the equilibrium rate actually is at a given time, a debate that Fed policymakers engage in at their every meeting.”
It is quite funny that it didn’t seem to occur to him that there would be nothing to discuss if the markets were left to set the “equilibrium rate” on their own. The correct interest rate reflecting society-wide time preferences would reveal itself in the markets if central bank intervention didn’t interfere (to be fair, the activities of fractionally reserved private banks can also push gross market rates below their “natural” level without a central bank, but only to a far more limited and hence less harmful extent).
Anyway, there actually isn’t really a contradiction in the statements of the two luminaries, merely a difference in emphasis: Dudley seems to think that based on the dictates of the “price stability” policy, the Fed could soon be forced to hike (so as to avoid “credibility” issues), while Evans appears to be looking for reasons that may allow the Fed to once again postpone acting on said dictates.
All in all, we would take it as a strong hint that ZIRP will soon face fresh complications.
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These idiots spend their entire lives learning calculus to run a ponzi scheme and still cant get it right
400 years you would think they could get it right. Sell some assets or STFU.
I am shocked!
SHOCKED!!!
sarc off//
Lately I've been implementing Applied Kremlinology with my reading of the New York Times and it works like this: hold it up to the sunlight and swiftly punch a hole through, then put your dick in it. Suddenly everything will make perfect sense and you'll find like I did that it works the same with any MSM rag. Now, online reading is different, first you....
Discord of the dimwits?
Babbling of the boneheads?
Dissonance of the dysfunctional?
or..
Cornering of the counterfeiters?
the chapwood index says inflation is around 10%--a large part of that come from increased taxes.
need I say more.
Yes I will.
Shadow stats which merely restates the govt data is an dhas been saying the comparative consistently reported inflation is 4% points highe rthan what hte gov reorts. so if the gov is zero, Shad Stats at 4 and Chapwood at 10--split teh difference between Shad Stats and Chapwood and we have a 7% inclation, which means interest rates should be upper single digit and when we see soc sec frozen for 2016m it really should be up by around 10% so not only does the govt fuck the seniors on cost of living for soc sec, it is keeping interest rates low too. The seniors ar epaying the price for this and others benefit.
Its the govt covert way of cuttiing benefits.
The seniors should be the rightfull bag holders. I couldn't imagine living to be that old and falling for this stupid shell game my entire life
The seniors wouldn't have it so bad with less soc sec if they let us earn some interest on savings. I'm too old to risk it all in the market so I get nothing for what I have saved all my life. The FSA on the other hand don't have any savings but they don't deserve an increase in soc sec either.
People who are good at calculus don't tend to be good at running ponzi schemes. Need a Trumpesque personality for that.
'Lift off'!
Whatever happened to 'escape velocity'?
Whatever happened to 'green shoots'.
Can't believe nobody ever calls them out on this shit, unless there's some sort of conspiracy. Which means there HAS to be a conspiracy.
it is all stuck in the bullshit laying on the ground...the Green shoots died along with the middle class. The maggots on Wall Street are eating the BS up!
The head scratching needs to stop.
It is intentional, as is punishing responsible savers while rewarding the malfeasant.
Jekyll Island, a global bankster cabal - the FED is just one tentacle.
I sincerely can't wait until they collectively STFU!!! Either do something or not, just STFU about it!!!
Need rope and trees for that.
Lamp Posts will be ok for those who are ecologically minded and tree friendly ... like from Seattle and Portland. Being draaged from a low emission high mpg auto, like a Prius, is also acceptable.
Both will get the ... mission accomplished, so to speak.
Just hangin' around in Stalingrad.
that is exactly how you know SHIT HITS THE FAN SOON. If they could do something else, they would. They can't. You tell me how far you can extrapolate this out?
Did somebody kick Dudley's two front teeth out?
I guess he used to be a smartass already back in high school...
You had to be mildly retarded to be let in and made one of their useful idiots. We never had a chance
This article is Fed Speak
in the trash it goes
Markets made 70 points in about ten minutes. At this rate they should be able to raise rates by lunch and be sitting easy on 17,000 for the final ramp. These men cannot lie.
Do you not believe in the magical-SP500-lifting-power of unexpectedly-low-artificial-interest rates in India?
expect low volume hft pump and dumps,sort of like a poker machine churning the coins in its guts
I hope this wasn't a surprise. You are seeing the end game right before your eyes. How else do you think it was going to go down? Their playbook rivals a junior high football team. Do we hand off left or right to PPT
Said it before...and I am far from original. Complex systems fail. The only built in redundency is corruption times two. There are no fail safe means that hold back the tide of complexity meeting greed and stupidity.
Great wall of China worked......for a while. Then it didn't. Too complex to maintain against the odds.
FED IS accomplishing its UNstated goals. Disruption as a means to futher consolidate power. Abolish cash and all this will be "fixed", mantra of bullshit.
Complex systems fail.
A properly managed MOE process is trivially simple.
Trader's create money by getting their trading promises authentically certified. We call this money. They destroy money by returning those certificates, thereby delivering on those trading promises. In the mean time those certificates circulate as the most highly valued object of "virtually every" simple barter exchange.
If the trader fails to deliver, the default is immediately recovered by an interest collection of like amount. This guarantees perpetual zero inflation of the MOE itself.
The operative relation is: INFLATION = DEFAULT - INTEREST = zero.
Any second grader can handle the complexity of the process. It's just simple addition and subtraction.
Another usurious system unravels (again). The players are stunned and confused (again). The plebes take it in the ass (again). Everyone chases their tails until the day of reckoning (again). It all collapses then we can do it all (again).
neither Dudley nor Evans can possibly know at what level short term interest rates should be set.
In a properly managed MOE process, INTEREST is an amount (not a rate). It is perpetually equal to DEFAULTs measured. The operative relation is: INFLATION = DEFAULT - INTEREST = zero.
Since a measure of DEFAULTs is not available anywhere ... and never has been, there is no chance any MOE management process we have ever had has been operated properly. None!!!!
And that's by design. Our improperly managed MOE process allows the financial institutions and capitalists to steal a portion of every trade through arbitrary interest collections. It allows government to steal a portion of marketplace vitality through inflation.
Governments and financial institutions are two sides of the same corrupt coin.
That's funny stuff! Can I stream both speeches from Comedy Central?
Sesame street too.
Let's be honest. For them to raise rates it will cause massive cuts from somewhere. We know how this congress would make that virtually impossible. So you keep rates zero instead of overthrowing the US government, who owes you 4 trillion still.
But is it good for the banks?
while the other is telling us that after abandoning its employment rate guidance, the Fed should ditch its “inflation target” guidance next.
What "inflation target guidance"? INFLATION is perpetually zero everywhere in a properly managed MOE process.
"employment rate guidance" is the "designed in" flaw in our Fed mismanaged MOE process. A properly managed MOE process has no concern for employment. Its only job is to certify trading promises (those certificates commonly known as money) and monitor them for successful delivery. Its job is to detect delivery failures (DEFAULTs) and immediately recover them with equal INTEREST collections.
That's it!
Obviously the Fed isn't doing this. It has never measured DEFAULTs so it has never been able to make proper INTEREST collections.
The operative relation is: INFLATION = DEFAULT - INTEREST = zero.
This "designed in" flaw gives the Fed (a collection of private international bankers) the cover they need to operate their very profitable farming operation (commonly known as the "business cycle").
It's always uncomfortable talking to economists knowing that my dog fundamentally understands more about the subject than 98% of them
I miss Ben Burrnankeeee... he is always mouthing his way..in such an eloquent way..here is his analysis of interest rates..
“The best strategy for the Fed I can think of is to set rates at a level consistent with the healthy operation of the economy over the medium term, that is, at the (today, low) equilibrium rate. There is absolutely nothing artificial about that! Of course, it’s legitimate to argue about where the equilibrium rate actually is at a given time, a debate that Fed policymakers engage in at their every meeting.”
Here is what he meant.."Think of interest rates as rain..you need the right amount."
End of the FED is end of the Anglo American empire. This is what you are watching unfold. End of liberalism and gay rights, end of pensions, end of easy life for the west.
Will be hard, people here do not like to work for peanuts,and work hard.
“Social Credit holds that the policy of production should be determined by consumers in a consumer-motivated economy wherein the consumer “vote” or exercise of choice motivates production by expressed demand. If consumers do not have sufficient earned income to purchase the entire current outflow of consumer goods at any given time then they must seek additional income. If they are forced to take out consumer loans issued by banks on bank conditions they cannot exercise free choice and they are penalized by loan charges. If they are forced to engage in some other production activity in order to obtain their otherwise insufficient purchasing-power they will be compelled to engage in activities which may–or may not–be something of which they approve, i.e., wasteful activities or even armaments for use in war. Because the deficiency of purchasing-power grows with the rapid displacement of labour by automation, robots and artificial intelligence which increases the allocated capital component in prices, consumers are increasingly forced to contract debt and/or e“Social Credit holds that the policy of production should be determined by consumers in a consumer-motivated economy wherein the consumer “vote” or exercise of choice motivates production by expressed demand. If consumers do not have sufficient earned income to purchase the entire current outflow of consumer goods at any given time then they must seek additional income. If they are forced to take out consumer loans issued by banks on bank conditions they cannot exercise free choice and they are penalized by loan charges. If they are forced to engage in some other production activity in order to obtain their otherwise insufficient purchasing-power they will be compelled to engage in activities which may–or may not–be something of which they approve, i.e., wasteful activities or even armaments for use in war.
Because the deficiency of purchasing-power grows with the rapid displacement of labour by automation, robots and artificial intelligence which increases the allocated capital component in prices, consumers are increasingly forced to contract debt and/or engage in evermore undesirable “Social Credit holds that the policy of production should be determined by consumers in a consumer-motivated economy wherein the consumer “vote” or exercise of choice motivates production by expressed demand. If consumers do not have sufficient earned income to purchase the entire current outflow of consumer goods at any given time then they must seek additional income. If they are forced to take out consumer loans issued by banks on bank conditions they cannot exercise free choice and they are penalized by loan charges. If they are forced to engage in some other production activity in order to obtain their otherwise insufficient purchasing-power they will be compelled to engage in activities which may–or may not–be something of which they approve, i.e., wasteful activities or even armaments for use in war.
Because the deficiency of purchasing-power grows with the rapid displacement of labour by automation, robots and artificial intelligence which increases the allocated capital component in prices, consumers are increasingly forced to contract debt and/or engage in evermore undesirable pseudo-economic activities.
This trend toward increasing debt and/or wasteful production activity may seem ironic but it is an inevitable outcome of the defect in the present system of industrial accounting as it interacts with the financial system and national accountancy to create a growing shortage of effective consumer purchasing-power.”
Wallace Klinck-economic activities.
This trend toward increasing debt and/or wasteful production activity may seem ironic but it is an inevitable outcome of the defect in the present system of industrial accounting as it interacts with the financial system and national accountancy to create a growing shortage of effective consumer purchasing-power.”
Wallace Klinckngage in evermore undesirable pseudo-economic activities. This trend toward increasing debt and/or wasteful production activity may seem ironic but it is an inevitable outcome of the defect in the present system of industrial accounting as it interacts with the financial system and national accountancy to create a growing shortage of effective consumer purchasing-power.” Wallace Klinck
“Social Credit holds that the policy of production should be determined by consumers in a consumer-motivated economy wherein the consumer “vote” or exercise of choice motivates production by expressed demand. If consumers do not have sufficient earned income to purchase the entire current outflow of consumer goods at any given time then they must seek additional income. If they are forced to take out consumer loans issued by banks on bank conditions they cannot exercise free choice and they are penalized by loan charges. If they are forced to engage in some other production activity in order to obtain their otherwise insufficient purchasing-power they will be compelled to engage in activities which may–or may not–be something of which they approve, i.e., wasteful activities or even armaments for use in war.
Because the deficiency of purchasing-power grows with the rapid displacement of labour by automation, robots and artificial intelligence which increases the allocated capital component in prices, consumers are increasingly forced to contract debt and/or engage in evermore undesirable pseudo-economic activities.
This trend toward increasing debt and/or wasteful production activity may seem ironic but it is an inevitable outcome of the defect in the present system of industrial accounting as it interacts with the financial system and national accountancy to create a growing shortage of effective consumer purchasing-power.”
Wallace Klinck
A pricing model can be created no matter what the circumstances.
Well, you have to be in business...
Cluelessness, or a cover-their-ass smoke screen?
They can’t reveal all the details of what they know or plan to do without revealing their true sources and masters.
That’s the real trap the Fed is in now.
"I learned that they don’t know what they’re doing. They don’t have a clue. They’re in uncharted waters and they’re faking it." - Nomi Prins
Things that make you go 'Hmmmm...':
- If the 'Transparent Fed' intentionally says things in a way that no one can understand...then did it really say anything?
-If the 'Transparent Fed' statements are so inconsistent and internally at odds as to make all policies within the range of their statements...then was the Fed actually transparent?
"It evidently hasn’t occurred to Mr. Evans just yet that the policies of the organization he’s a member of may be directly responsible for said permanent state of economic emergency."
'nuf said.
Long term human response to extended crises is not very healthy. If the status quo is somehow sustained for much longer, I really feel we will see some extraordinary behaviour from the citizens, businesses and worst of all, government.
The more I listen to bastards like Dudley the more I hope the FED crashes and burns even if it brings the whole Western system down with it. Which I might add will be very painful for me and mine.
"...The Fisher price..." The toy company?
A classic from the onion was managerial double speak. Can't link it right now.