This page has been archived and commenting is disabled.
The Regressive Fed
In a move that defines the word 'irony' better than the dictionary does, the Federal Reserve raised rates just five hours after their own Industrial Production series was released showing an almost certain entry into a US recession (see chart below).
The Federal Reserve's hidden role as banking lobbyist won out over their populist role as counter-cyclical policy provider and they raised rates for the wrong reasons, putting them in the US-1936 and Japan-2000 policy mistake club. Banks didn't waste any time in proving what the raise was for. Most big banks immediately raised their 'prime' borrowing rates by 0.25% yet, of course, they didn't raise what they pay on deposits.
The press conference with Janet Yellen after the announcement had an almost comic tone as journalist after journalist asked a version of the same rhetorical question; how does raising rates help to raise inflation and GDP growth? Ms. Yellen filibustered her way through the answers by effectively saying that she sees all of the negatives, but that they do not matter because of 'blah'. Replace 'blah' with your choice of 'transitory', 'reasonable confidence', or 'reasonably close'. By raising rates, the FOMC has effectively substituted the ire of bankers for the ire of main street and for a Fed that constantly battles negative main street perceptions, this is regressive and disappointing.
It is important to point out that the Fed raising rates is probably better for our positions than had they not raised, but it doesn't mean it was the right thing to do. In the day after this raise, we note that markets are trading rationally for the first time in a long time. The Dollar is near a new high, Oil is at a new low, Stocks are lower, and Interest rates are lower. The FOMC's mistake may prove to be the catalyst bringing long-term rates much lower, but the loss of a predictable Fed is more profound.
»
- 19 reads
- Printer-friendly version
- Send to friend
- advertisements -
They are so ass backwards they disbelieve their own data.
When November's Inventory buildup hit, GDPNOW said that was a good thing.
These people are clueless(and dangerous).
The Fed is just letting everyone know they're in control. Economics be damned.
GDPNOW should say it's a good thing(GDP increase), it is just a model for predicting GDP. GDP is inflated by inventory buildups, at least until liquidation.
Truly is amazing. If interest rates were normal, the FED would be cutting interest rates due to the economy being in shambles.
Santa Rally
Silly ZH doomers. Everyone knows this is transitory...or something...
The privately held Federal Reserve are not "lobbyists" for the banks. They "are" the banks. Who do you think owns the Federal Reserve! Geez!
Tuco
It's a banking cartel, much like OPEC was.
Only these guys can start and finance wars.
If any of their member banks do not toe the line, they are regulated into line or out of business.
smug alert. the fed is in real danger of disappearing completely up its own asshole.
You guys assume they could do what they claim. There is no control technology for open, evolving, complex systems.
And besides, the problem is now keeping the facade of the Treasury selling securities to the public that expects them to be repaid. Keeping $ inside a dead economy with kleptocracies in control of everything will be difficult. Carrot is interest, stick is and will be capital controls.
https://thinkpatriot.wordpress.com/2015/11/10/a-measure-of-propagandas-p...
Trump is NOT an outsider, in other breaking news.
https://thinkpatriot.wordpress.com/2015/12/15/donald-trump-you-are-being...
The Fed is frantically trying to convince everyone that the rate hike just implemented was not really a rate hike.
It was a pretend hike to foster confidence in the Fed as can be seen by that absurd interest rate dot plot they waved around.
"putting them in the US-1936...policy mistake club"
That was NOT a policy error.
Neither is the current move an error.
What it IS, is "defensive" ... as in if they
didn't do it, they and their precious US$
would be abandoned for other media.
And there is a lot more of that today than there
was in 1936.
The raising of rates has about as much to do with the Industrial Production series as the World Series of Baseball. What it signals is that the health of the TBTF banks' Balance Sheets have radically improved, after X number of years at the zero-bound and trillions printed up for the "window dressing". When they begin to radically deteriorate again [the balance sheets], rates will decrease.
It's called "indifference" - at least to anything/anyone other than the TBTF's. The TBTF's ARE the Federal Reserve! QED