"The Fed Has Failed" - A Disturbing New Warning From Bank Of America

Tyler Durden's picture

First Deutsche Bank, then Citi, and now Bank of America.

Following Wednesday's disastrous FOMC statement and Janet Yellen press conference, we predicted that it is only a matter of time before we get a return of the "Policy Failure" narrative.

Sure enough, here is BofA's Michael Hartnett not only validating this forecast just days later, but also laying out the framework for a disturbing new outlook, one which looks at a world in which central banks have lost the "war against deflation", and what will happen once Quantitative Failure spreads from Europe and Japan to the US.

From BofA's Michael Harnett

From an absolute return perspective, as opposed to a relative return perspective, US equity & global credit prices have been stronger than the above fundamentals imply. This is due to the Mountain of Cash (i.e. bearish sentiment) & the fact that every interest rate in the world has been plunging toward zero. Global government bonds are annualizing 23% YTD total returns, the highest in 30 years (Chart 5). And currently, $9.7tn of global bonds are yielding <0%.




As stated before the inability of bank stocks and bond yields to rise is due to the failure of monetary policy to engender sustained economic growth. Despite unprecedented central bank policies of QE, ZIRP & NIRP, 655 rate cuts since the Lehman bankruptcy, $12.3tn of central bank financial asset purchases, prospect of a “one & done” Fed, central banks have lost the “War against Deflation”. They have failed to stimulate animal spirits depressed by the 4D’s of excess Debt, financial Deleveraging, aging Demographics and technological Disruption.


This changes if Quantitative Failure spreads from Europe & Japan to the US. A rise in US bank CDS and/or a dive in assets related to consumer & housing credit would be very negative for global asset prices in our view. Note the new whispers of a peak in the US consumer credit cycle which, if true, at a time of zero rates in an $18 trillion, consumer-led economy would be concerning.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
NumNutt's picture

Nice to know we are fucked....

Troy Ounce's picture



No panic. War will come

Antifaschistische's picture

OH THE HUMANITY!!   Please don't let anything get cheaper!!!!   THAT WOULD BE TERRIBLE!!   The world is a much better place now that land is $2 million dollars an acre in my hood (77024).   The world is a much better place now that a freakin pickup truck cost $40-$70K (which used to be an entry level vehicle for high school kids)......oh God please don't let prices go DOWN!!!

pods's picture

I was just pricing used pickups.  My jaw dropped.  Granted, they were Toyotas, but still.  

I cant believe how much trucks are now. You can spend 50-75k on a freaking pickup.


Powerslaved's picture

Try getting a new base model pickup. They don't exist. The manufacturers pretty much force you to buy the upgrades. Try to order a new truck with no ac, no power windows and locks, vinyl bench seat and so on. You will find it will be cheaper to buy one with all the goodies.

shamus001's picture

Thats because they all MUST come with OnStar so your travel patterns can be tracked and stored.

Ever "manually" disconnect your OnStar? Even when its (supposedly) off (meaning your not subscribing)?

The Auto manufacturer calls you and insist that you take your vehicle in to get it repaired (for free!) If you tell them youde rather not, and just leave it down, theyll argue with you to get it connected and operational!

How do they know it doesnt work unless your being monitered in the first place?


CNONC's picture

I can't afford them, but ISIS can.

More Ammo's picture

Of course, ferule.gov sends them the tax money stolen from us...

JRobby's picture

The "owners" are disgruntled? Fighting amongst themselves?

Croesus's picture

Did it really come as a surprise? I mean, did you really, honestly expect the government, and the bankers to be honest with you? 

Bankers and politicians won't be honest until they have a knife sawing against their throats. 

doctor10's picture

Time to "elect" Hillary and have woar party-

except we all be nuked-she prolly won't notice the diff!!!

Winston Churchill's picture

I think you meant we are about to be gang raped.

SuperRay's picture

So why didn't this brilliant asshole say this 8 years ago when it might have made a difference. Certainly won't make one now. Negative rates will drive PMs to the moon as the big money would rather hold something of intrinsic value, now that the implosion is imminent

BandGap's picture

Jack Elam for President.

Ditch's picture

Just jawbone stimulation already!

pods's picture

I love these "FED has failed" stories. 

The FED has recapitalized their owners, who are now ready to take possession of the real property that the people have left.

First by inflation, then by deflation..............

The FED has succeeded wildly in moving capital up the pyramid. If you think the FED has failed, you might wanna recheck your premises.


hxc's picture

Yup. Failed at what is the question.

Troy Ounce's picture



Depending how angry the populus is...they will take back what was rightfully theirs.

shamus001's picture

This is how its happened in every countey that goes tits up. Including Zimbabwe (most recently)

shamus001's picture

Right, except when the country burns, so do all of those assets. In the end, they own dirt, then sell that dirt to their own debtors, and lastly, politicians will reclaim the land in the name of America in order to secure long standing favor and office, then the land is sold (again) dirt cheap ti Americans, and we start over again.

More Ammo's picture

But the BLM won't give up Nevada or the other western states they "own" most of...

fbazzrea's picture

too rich in natural resources for the lil folks

silverer's picture

That's pretty accurate. The printing press churns out zillions of pieces of paper that get exchanged for valuable tangible things. Down everything went once the honest gold backed money was gone. But the pyramid's top is not done with everybody yet, not by a long shot. Hey, each week now I get AT LEAST 10 phone calls offering me loans for up to $200,000. They want everyone hopelessly in debt, just in case they might have missed something. Think about everyone being in debt, then they finally raise rates. It's game over.

harami's picture

You know shit is about to get real when they're actually admitting there is a problem. Aftershock heralded this as the final warning before the SHTF in 2009.

g&#039;kar's picture

time to shut down the fed and repudiate the debt owed to the fed's private bankers

shamus001's picture

Technically, since the FED is a private "for profit" business owned by member banks, theu can purchase ALL the US debt, then go bankrupt! Voila!

US prints its own currency

FED debt notes are worthles

Markets rediscover value, and growth begins anew

bullet's picture

the 4D's line is best explanation to date...

conraddobler's picture

We have always been herded down this road.

Japan is the model.

It's a kind of evil Munchhausens by proxy economics.  You keep killing the patient to make yourself more needed.

These fuckers are ending up owning everything.

Wake the fuck up when the BOJ owns 33 plus percent of the JGB's what that is, is a fucking TAKE OVER of EVERYTHING you dolts.

It's the Soviet Unkon model updated a bit but it ends the exact same way.

Maybe if I insult people's intelligence they'll start to get this just to be fucking pissed off with me?


hxc's picture

This is zerohedge; we all fucking get it.

More Ammo's picture

This is zerohedge; we all fucking get it.


Aparently not, you got downvotes ...

vasallo7g's picture

I would say this crisis is something new because the big issue is the dollar.

If the dollar collapses is something that never happened before it would be like a new ball game ...?

Dewey Cheatum and Howe's picture

Hello to all. I'm a long time tracker, new poster . tremendous wealth of knowledge here,  especially enjoy the posts from knuckles and no debt. Thanks for the education. 

Who could not see this coming, what with the repeal of Glass Stegall  And other regulatory investor safeguards. So now the world has Gramm Leach Bliley. Thanks Phil Gramm.

pods's picture

Well welcome to the hedge.  Wish times were better, but it seems that just isn't the case.

And now that you are here, just a couple of questions.

We will be having a FEMA camp softball team and were wondering if you could handle second base?  


Manic by Proxy's picture

And who will handle the balls? Obammi will be available January.

buzzsaw99's picture

fucking tbtf ingrates.

overmedicatedundersexed's picture

fed cannot do much...this will take a reset..and many mega banks and the fed itself must go BK..and the people print our own damn money once again..unless some genius can pay off the debt , but ,to us ave joe's it looks impossible without a lot of trama to wall street and the nwo mega corps..so kick the can yellen.

nibiru's picture

Note the new whispers of a peak in the US consumer credit cycle which, if true, at a time of zero rates in an $18 trillion, consumer-led economy would be concerning

I think this is when poor people are scratching their asses (just like Joachim Loew) before they will get screwed again... 

the grateful unemployed's picture

the feds not fighting deflation its managing it. the worst outcome is a deflationary crash, so they are spreading the destruction out over a wide area (the global economy) it will probably take another world war to get the inflationary bias going again. what they need to do is burn a big pile of money, and not just on government spending for pork barrel projects. if they would respect the debt ceiling and balance the budget they could stop deflation, but lay it all at Obamas feet. he could have done those things

Archive_file's picture

Im going to laugh when all these young, new doctors rolling around in Porsches' find the entire state subsidized medical industry completely collapse because Obamacare is a failure and most Americans simply reject it.

fbazzrea's picture

can't wait! i've been hoping for a nice pretty Porsche in the repo pile... do they still have targa tops?

Jack Burtan's picture

Must keep the breathing tube in just a little longer.