Deutsche Bank: "There Is An Element Of Torture To The FOMC Cycle In This Broken Financial System"

Tyler Durden's picture

DB's Jim Reid shares his perspective on yesterday's Fed announcement:

There is also an element of torture to the FOMC cycle in recent years. The pattern for the Fed is that you slowly talk up the prospects of an imminent hike, you then get closer to it, build it up even more and then just before you pull the trigger something invariably happens in this broken global financial system to force you to pull back and start from scratch. Last night's statement from the Fed hinted that they are starting this process again though. As we expected it was slightly more hawkish (i.e. leaving the door ajar for September) but it's clear that there's a way to go yet before they feel they can safely pull the trigger.


The big takeaway from the statement was the observation that ‘near term risks to the economic outlook have diminished’. Much of that will likely reflect much calmer markets post Brexit and also the bounce back in employment data since that weak May payrolls print. On that the statement showed that committee members viewed recent job gains as being ‘strong’ and also that labour utilization has shown ‘some increase’. Also noted was the observation that household spending has ‘been growing strongly’. On the inflation side of things, there wasn’t really much of a change in view with the statement revealing that ‘market-based measures of inflation compensation remain low’ and that ‘most survey-based measures of longer-term inflation expectations are little changed, on balance in recent months’.


Unsurprisingly there was no guidance as to when the Fed might next hike and market probabilities based on futures pricing were actually fairly little moved. The odds of a September hike are hovering around 26% this morning, while December is at 45%. That compares to 28% and 49% prior to the statement. The biggest reaction in markets has probably come in FX where interestingly the US Dollar is down -0.75% or so relative to just prior to the statement release. Treasury yields also dipped lower although were given a helping hand by the soft durable goods orders data earlier in the day.

Today the risk weakness in US risk assets, unexpectedly, continues  - if only as of this moment - which is at odds with what has been since reclassified as a modestly dovish statement.

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DeadFred's picture

Someone is waking up it seems. Time to look for a replacement.

back to basics's picture

Seven fucking years after the recession officially ended and they still can't hike any more than a token 0.25pc. 

This alone should tell you how fucked up things really are, made more fucked up by the most insane monetary experiment the world has ever seen.

But if you are the 1%, you love it. 


InsaneBane's picture

It's time we name the cancer in .gov, FED and wall street controlled by the zionist lobby.

Cognitive Dissonance's picture

FedSpeak reminds me of our cat.

Tramp likes to bring live animals into the house and play with them. He doesn't wish to kill them, just play. Of course, when you are 10-100 times larger than the friend you are playing with, the inevitable happens.

I suspect the Fed will kill us all, even though it is just playing with us on behalf of the elite.

DavidC's picture

That made me smile!


Cognitive Dissonance's picture

Then my work here is done. :-)

<Mrs. Cog always makes me carry out the dead 'friends' before she will climb down from the dresser. Not sure who's gonna carry us out when the Fed is done with us.>

DavidC's picture

Done? DONE?!

No, never!


geno-econ's picture

That mouse will die right after the Nov. elections.  Then Tramp gets to play again although he may be overwhelmed by a pack of mad Dogs. 

DavidC's picture

back to basics,
How eloquently stated and I agree with every word of what you wrote!


Cognitive Dissonance's picture

Then my work here is done. :-)

<Mrs. Cog always makes me carry out the dead 'friends' before she will climb down from the dresser. Not sure who's gonna carry us out when the Fed is done with us.>

InsaneBane's picture

Only one thing wrong with this picture—it’s a complete, fabricated lie, fabricated by Washington with the collusion of the Wall Street banks and the Federal Reserve. The reality is pretty scary for those living in ignorance. The cracks now emerging in an unprecedented level of US corporate debt are flashing red alert on a new economic crisis, a very, very ugly one.

Deep_Out-of-the-Money's picture

Well I am in the 1% (only just) and I don't love it. It is more like the 0.001% that are winning in this market, no one else is. If interest rates were where they were 25 years ago, I could afford a modest retirement. No such luck now, either keep working or speculate in over-inflated markets and hope I can pull out before everything falls in a heap. And we wonder why no one is spending!

TeaClipper's picture

You must have a very different idea of "modest" than most of us. If you are in the top 1%, and of a retiring age, but still cannot afford to retire, then you took a seriously wrong turn somewhere

Deep_Out-of-the-Money's picture

First of all, I live in Australia, not the U.S. There are no affordable cities here. The cost of living is expensive everywhere. Secondly, just to clarify, I am using the Credit Suisse global report definition of 'top 1%' which is essentially a net worth in excess of around USD850,000. Remember, the median house price in greater Sydney area is over USD 750,000. Any married couple need only have an average or better-than-average home, no debt and another million or so in liquid assets to be 'the 1%'. We need 60-75k a year, after tax, to live a modest life. With 10yr treasuries at 1.5%, you do the math.

quicknthedead's picture

They can not, and will not, ever raise the interest rate again ...


So on we go -- and next stop, The Reset ...

At our doorstep.  Best get ready.


dark fiber's picture

It is ironic that DB is part of what happened this time.

SoilMyselfRotten's picture

Ya, did it have to be the worst apple in the bunch pointing it out?

GunnerySgtHartman's picture

That tells us DB is getting desperate to survive.

NoWayJose's picture

Psssst... Hey DB.... Buy gold..... No torture if you own it!

buzzsaw99's picture

Reid packs his golden parachute, resume in teeth, dials 911 for the waambulance in case of a bad landing.

RawPawg's picture

yeah, tell me about

it's Torture for us in the US who want this to all end as well


odatruf's picture

Shorter Jim Reid: I'm shocked, shocked that there is gambling going on at this establishment!

He's such a deutsche. I may have spelled that wrong.

Cognitive Dissonance's picture

When I can't spell a word I try to find a picture. Here's one of Jim Reid when he was younger. Nice profile Jim.

Jim Reid

VarenneRiver's picture

"Broken Financial System"....of course our bank is heroically fighting against that...with Hillary's help!

buzzsaw99's picture

the only reason the fed wanted to hike in the first place was for appearance sake, that is to say that see, the economy is doing great! hard to pull that one off if by hiking the stock market crashes into a smoldering heap. the last two substantial hikes they wanted to crash the market. this time it is the last thing they want. maybe db should hire me instead of all those buffoons.

Last of the Middle Class's picture

Wack a Mole economics is so much harder than simply providing a level playing field and staying the fuck out of the way. Hate it when that happens.

axel_hose's picture

What? No comparisons to Lucy and the football?

wholy1's picture

Interesting to see conspiring criminal enterprises blaming/trashing each other.
No honor among thieves?

Dubaibanker's picture

Self-cannibalisation in the financial sector has begun....

One cannibal is eating another cannibal. (I wonder if self cannibalisation is the right word?)

Fortunately, someone outside of the fraudulent US Govt sued Goldman Sachs for doing "God's work" (which means cheating, money laundering, front running their clients, selling dumb IPO's at inflated prices to clients, giving wrong advice and misselling without any consequences whatsoever - like saying in 2014 that oil will go to USD 200 -, siphoning money and running the Central Banks of half the world) etc.

Former Hong Kong-based fund sues Goldman over 1MDB links in 2011 Malaysian bank merger
bada boom's picture

Soon you will be able to change it from "recent years" to recent decades.

hedgefunddartthrower's picture

No shit Sherlock. Yellen is as two faced as a married nymphomaniac cheerleader for the Dallas Cowboys... 

Aussiekiwi's picture

One and done!, there will be no more interest rate rises. Of course you can't let the market know that, it would panic, so we get these cycles over and over again, we are going to raise, definitely going to raise, considering a rate rise, might raise if the situation looks promising, oh no!! can't rise the XYZ is not quite where we want it to be, so no raise this time, but its still on the table for next time etc etc.

spanish inquisition's picture

I think I can sum up the last few years: A girl goes into a bar feeling a little down and looking for some excitement. She meets a man named FED. "Hey FED, my name is Merica, I was wondering of we could do something, different, maybe a little kinky?". FED assures Merica that he is the guy she wants. They go to her place and as she comes out after putting on something more comfortable, FED is heading out the door. "Hey FED where are you going? I though we were going to do something kinky". The FED replied "Well, I stole your money, shit in your purse and fucked your dog, so I guess I am already done."

J J Pettigrew's picture

Ben Bernanke wrote the "EXIT STRATEGY" article in July of 2009 in the wall street journal...

He said that when unemployment fell below 6.5% the normalization of rates will begin..

The Dow Jones Industrials were around 9150

now the Dow has doubled...

now the unemployment rate is around 5%....


This is a scam....FREE BEER TOMORROW


pitz's picture

Does anyone really believe that 'unemployment' is only "5%" as they claim? 

You Only Live Twice's picture

The Fed cannot raise rates because of the corner it is pasted into. Its first problem is the current prolonged period of low oil prices, which undermines the petrodollar system and the need for foreign nations to have US debt to buy Oil. With an expanded debt sheet at 19 trillion dollars, and unstable markets, raising rates will either collapse the markets, bankrupt the US or trigger a banking failure as there is simply too much credit out. The major problem from not raising rates, is that it undermines foreign confidence in the USD, which in turn could lead to a gradual rejection of it as a global reserve currency. That is why China, Russia, India and Iran are fleeing to gold. That is also why many European countries want to repatriate their gold as they see the writing on the wall. OPEC must start to sense it too, and if they band together and decide to end the petrodollar system, then it is the end of the USD. Whatever option is chosen, there is no real way out this time. 

LawsofPhysics's picture

Correct, but the truth is that that 19 trillion in debt is pretty small compared to the paper claims and debt the Chinese have introduced in the last 10 years.  What part of all fiat are doomed don't people understand? 

Moreover, most of the debt is in fact fraudulent!!!!!  Those bad banks and bad businesses should have gone bankrupt in the first place!!!!

Yes the USD and all fiat are doomed, but what will 8+ billion people look to for a means of exchange?  My guess would be barter before PMs.

However, PMs will remain the preferred collateral, regardless of the "fiat du jour" so you need to have physical in your possession after the reset in order to restart your business.  Providing that you survive WWIII of course.

You Only Live Twice's picture

Very true; totally agree! 19 trillion USD is only the government debt, not all debt. With derivatives, who knows how large the debt truly is.

LawsofPhysics's picture

LOL!  Broken?  Broken for whom? Anyone I know in banking and finance has done quite well, but then again they have access to free money (NIRP/ZIPR)...

Anyone that has to actually perform real work or manufacture a real product has been getting fucked.

Ignorance is bliss's picture

What we know
1. The stock market will not crash as long as central banks buy equities.
2. Consumers Have too much debt. Income and wages are under pressure. Low bond yields and globalization are too blame.
3. The government is printing and monetizing its debt. Government debt does not matter. Until the currency is rejected globally.
4. consumer debt saturation slows the economy. Business income slows they layoff workers and the cycle worsens. We are seeing this in almost all industries.

To fix this situation you have to fix the problem The problem is the consumer. They are indebted and under wage / job pressure from globalization.

Option A. Create Tariffs. which could lead to war. This brings industries home to increase their competitiveness within the U.S. And creates jobs allowing Joe six to rebuild his credit.
Option B. Go to war and inflate the economy on a war footing. Artificial stimulus. See "1984"
Option C. Helicopter money for the great unwashed. The Bernanke solution.

the grateful unemployed's picture

1 is not necessarily true if you knew the government would buy your (losing) positions why wouldnt you sell to them? its another word for QE

2 consumers pay too much for debt compared to what the banks pay

3 the government (of Japan) is considering direct monetization, but government spending always crowds out private lending, where borrowers have to pay more, to be fair the government should monetize at the prevailing rate. congress (or the diet) should at least be able to see to that

4 what slows the economy is consumers paying off their debt.

but A should work, America was great when we ran a vertical economy, we mined the ore, processed the steel and made the cars all in America

look at modern economic history and you see that everytime a war winds down the economy goes in the tank, post Vietnam good example

C they are already talking about the living wage bill, which i think is around 13K a year. almost enough to pay your obamacare premiums

zero interest rates forever may be the feds lasting legacy, why should people pay to borrow money? assuming they do and they will the playing field should be level, not zero rates for some and high rates for others.

in the future you wont have a birth certificate you will have a bond, and you can use that bond anyway you choose. if you use it wisely the value of the bond will go up.


TradingTroll's picture

Hate to break it to you but the stock market  crashed in the fall of '14, Aug '15 and Jan-Feb '16, all during government  buying programs.

Bopper09's picture

Without any doubt, it will be option C.  They have no fucking clue how to do anything else.

enosenose's picture


Yellen's pic is becoming to have the same effect as Gartman's... you know nothing good comes out of spotting it.

JailBanksters's picture

We all know that History repeats itself, but how many Janet, how many times.

How may times before you say, I can't do this shif anymore.


buttmint's picture

...why do all pictures of O' Yellen always depict her as a DEER IN HEADLIGHTS?

Because she herself is a numbskull and being kept outta the loop. 

Conax's picture

This is why Yellen was deployed. To deflect vengeance.

Poor old gramma, don't call her a criminal or threaten to shoot her, she's just trying to get home to make cookies for her grandkids, she isn't a demon from the pit, she wubs all of you soo much and has to wear depends. Now patiently wait for justice some more.