From The Last Sane Person At The Fed: "More Easing Will Not Lead To Growth, Would Lead To Inflation"

Tyler Durden's picture

There are two key sentences which explain why there is now only sane voice left among the FOMC's voting members (recall that back in December 2011 we explained that more QE was only a matter of time now that the Doves have full control). From Jeffrey Lacker: "I dissented because I opposed additional asset purchases at this time. Further monetary stimulus now is unlikely to result in a discernible improvement in growth, but if it does, it’s also likely to cause an unwanted increase in inflation.... Channeling the flow of credit to particular economic sectors is an inappropriate role for the Federal Reserve. As stated in the Joint Statement of the Department of Treasury and the Federal Reserve on March 23, 2009, 'Government decisions to influence the allocation of credit are the province of the fiscal authorities.'" That, however, is no longer the case, as the only real branch of 'government', accountable and electable by nobody, going forward is that located in the Marriner Eccles building, named ironically enough, for the last Fed president who demanded Fed independence, and who was fired by the president precisely for that reason. It is in this building where the central planners of the New Normal huddle every month, and time after failed time, hope that "this time it will be different" and that wealth can finally be achieved through dilution of money.

From the Federal Reserve Bank of Richmond

Richmond Fed President Lacker Comments on FOMC Dissent

The Federal Open Market Committee (FOMC) decided on September 13, 2012, to purchase additional agency mortgage-backed securities at a pace of $40 billion per month. The Committee released a statement after the meeting saying that it expects a highly accommodative stance of monetary policy to remain appropriate for a considerable period after the economic recovery strengthens, and that it currently anticipates that exceptionally low levels for the federal funds rate are likely to be warranted at least through mid-2015.

I dissented because I opposed additional asset purchases at this time. Further monetary stimulus now is unlikely to result in a discernible improvement in growth, but if it does, it’s also likely to cause an unwanted increase in inflation.

Economic activity has been growing, on average, at a modest pace, and inflation has been fluctuating around 2 percent, which the Committee has identified as its inflation goal. Unemployment does remain high by historical standards, but improvement in labor market conditions appears to have been held back by real impediments that are beyond the capacity of monetary policy to offset. In such circumstances, further monetary stimulus runs the risk of raising inflation in a way that threatens the stability of inflation expectations.

I also dissented because I disagreed with the characterization of the time period over which the stance of monetary policy would be highly accommodative and the federal funds rate would be exceptionally low. I believe that such an implied commitment to provide stimulus beyond the point at which the recovery strengthens and growth increases would be inconsistent with a balanced approach to the FOMC’s price stability and maximum employment mandates.

Finally, I strongly opposed purchasing additional agency mortgage-backed securities. These purchases are intended to reduce borrowing rates for conforming home mortgages. Such purchases, as compared to purchases of an equivalent amount of U.S. Treasury securities, distort investment allocations and raise interest rates for other borrowers. Channeling the flow of credit to particular economic sectors is an inappropriate role for the Federal Reserve. As stated in the Joint Statement of the Department of Treasury and the Federal Reserve on March 23, 2009, “Government decisions to influence the allocation of credit are the province of the fiscal authorities.”

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frenzic's picture

He is bought and paid for. Mr dove.

Atomizer's picture

LOL. Honey, look at that Federal Reserve endangered species bird in the back yard. He sure is singing a pretty tune.

[Chirp, chirp]

Michael's picture

Let's not forget what set off the Muslim countries revolutions.

Reason #1; Police and Government Tyranny and Torture.

Reason #2; US Federal Reserve Corporation exporting food inflation with their monetary policy all over the planet.


Suicide that Sparked a Revolution


Justice for Khaled Said, End torture in Egypt

Weekend Viewing; 



eatthebanksters's picture

Perhaps somone would be so good to kick Bernanke's can down the road...

vft2212's picture

Hey anti semitic bastard, has anyone told you plagiarism is not approved here. When you have something non racially biased to share and that you haven't read here before, go for it.

WhiteNight123129's picture

There can not be inflation if nothing is bought and sold, more wages forced into the system in non productive projects = stagflation =  mortgages repaid with confettis and melting against nominal wages, = credit card debts repaid with confettis, = capital owners (debt and and equities getting fucked, buffet getting fucked, share of capital versus wages shrinking). The Fed is pointing a flame thrower at aapl, goog, msft and orcl which have combined 1.6% of GDP in net cash and is telling them, either you burn it into poor IRR projects (stagflation) or I do it for you. Go Bernanke force those fuckers to sell their bonds and stocks and convert their capital into wages. Go Bernanke point the flame throwers on the cash of corporations, Buffet and Munger will hate it, Gold bugs and commodities bulls will love it. Bernanke is finally succeeding in forcing wages up nominally in relation to consumer debt (which stays fixed).



bdc63's picture

I've said it before and I'll say it again ... the FED only takes action for two things, and NEITHER of them are 'full employment" or "inflation".  What they care about are 1). stock market valuations and 2). keeping banks healthy/profitable. 

And, since the stock market is at 10 year highs, there was no reason to ease to help out the market.

Therefore, it has gotta be the banks.  I suspect Benny has inside information that something is about to blow in the derivatives market, and this move is all about that.

Did you hear his voice "shaking" in the news conference? ... I've never seen him nervous before ...

holdbuysell's picture

I also noticed his voice was different compared to other speeches after previous FOMC meetings. His speaking pace was quicker and had more energy behind it. It was one of those "something's different" about his timbre that is hard to quantify but was indeed noticeable.

Then listening to Warsh yesterday sealed it for me. This was well beyond a measured and incremental approach...something's afoot.

Debeachesand Jerseyshores's picture

I fear you may be correct in your assumptions,holdbuysell.

divedivedive's picture

I noticed the pace at which Bernanke was speaking as well. It was different. I attributed it to more conviction or certainty on his part.

Another thing that caught my attention, and I'm sorry I don't have his exact wording, was that I believe twice he mentioned - we are taking these steps in case the economy falters. I thought it odd that he swayed away from the jobs theme to seemingly anticipating something.


trebuchet's picture

This intervention was pre-recession: if they didnt US would dip and given the dip in EU + china, we could end up on slippery slope.


"Channeling the flow of credit to particular economic sectors is an inappropriate role for the Federal Reserve"


That is key: coz Fed just went into the housing business. banks gonna fall over themselves to write new crappy MBS to flip to the Fed.  

And the crappier ones they write, the more gets flipped. 


Thats why his voice was quivering, coz the fed is on thin ice with this one


Town Crier's picture

He looked very nervous a while back when Alan Grayson was questioning him about US money given to foreign banks.  The chairman answered that he didn't know what the foreign banks did with the money, and looked panicky.  Curiously, he never looks nervous when questioned by Ron Paul.

GoodMorningMr.VanRumpoy...'s picture

Alan Grayson was a lawyer and pit bull litigator before he went to congress. He knows how to get up and cross examine someone and get them to squirm.

The Good Doctor unfortunately hasn't developed that skill set. And is a bit more formal and too polite.

vft2212's picture

You forgot to re elect Obummer & to assure Bernanke '14. I better email Fairey for a poster

luna_man's picture




You confuse "nervous", for excited!

geewhiz190's picture

friday's volume in BAC may be some of the money that's been trapped there using this FED move as a chance to get out.  no doubt about it. this move by the fed does more to bail out the banks thean anyone else.

GaryNeville's picture

Yep he was nervous. I think he's getting nervous because he's out of ideas - the only thing he knows is money printing - as Faber put it "He's just a money printer!"

And sure enough he's been printing money for 5 years now and the economy is basically in a depression. I think deep deep down Bernanke knows there's nothing he can do to raise employment, so he thinks he'll just blow up a bubble in the stock market to create a wealth effect.

These guys all think the same - just look at what Greenspan, Bernanke and Krugman have stood for over the years - they are all in full agreement that bubble's are a good thing. Bernanke said it himself in the post FOMC press conference - "people with 401 ks etc will feel wealthier if stocks are up" etc. etc.

Krugman thinks exactly the same - he even implied last year that he often thinks that if mankind was in danger of some kind of alien invasion the economy would boom as the goverment would be forced to pump money into ET defense programmes - see here - - In effect - a military bubble would save us all..

Greenspan's contribution to bubble effect needs no introduction - whilst Bernanke will blow up a bubble in stocks, Greenspan managed to blow up multiple bubbles at the same time - .com and housing being 2 of note.

Hence the common theme, all these central planners have the same line of thought, bubbles are a good thing and we need them to provide the wealth effect. Prudence and sustainability is out - bubble's/ boom & bust is in with a bang. Get used to it!





Oh regional Indian's picture

Hah, funny. Good cop bad cop.

FED book of MEANings and DEAF-i-Nations:

Inflation : Good (managable)

Deflation: Bad (hard to rip off down and outers)

+, FRBNY is the power. the rest are just minor voices.

Or so I hear/read.


LMAOLORI's picture



If only he were in charge

frenzic's picture

I went to check out what meaning the part following lmao has and damn I am impressed. Keep it up.

LULZBank's picture

What does it mean? Cant seem to find it.

I am surrounded by this ads all around. "Get together with Top Russian women" even though I like to be on top myself and "Share your life with a Russian lady," what part of "I am only interested in sex" they dont get?!

And with the kind of pictures on those baners, except for Marina 26, Russia who seems to be an alcoholic, its difficult for a young man like me to focus on anything intelligible.

They say, men have 2 heads but not enough blood for both of them to work at the same time.

P.S. Before the Einsteins jump on it, NO, I have not been surfing any dating sites lately and this is what is getting me even more puzzled... How do they know Im horny?!!

blindman's picture

your age and your gender. that is all.
and they, whoever, get paid good money for
that simple insight.

q99x2's picture

Arrest him too. He's guilty by association.

loveyajimbo's picture

Wait a minute!!!  You mean that buying LOADS of toxic MBS CRAP from the crooked bankers will do nothing to create jobs or spur the economy?!?!?  Give this Brainiac a Nobel!!  It is not about stimulating the economy anyway, it is about facilitating one more big round of banker bonuses... and this WILL work for THAT.  I guess Blankfein will have to give bernanke another couple of "specials".

lotsoffun's picture

mr. gupta took the dive.  lloyd is certainly doing god's work as any saint or angel would - but he learned to keep a low profile.

anybody seen jonnie corzine lately??  i wanted to wish him a happy birthday.  can't find him anywhere.  no more speed traps on the way to the troopers balls?



A Lunatic's picture

"this time it will be different"


As in, "this time we will conquer the whole fucking world"

solgundy's picture

blah,blah,blah......the Brenank is backing Barry.....Mitt said he'd fire the Bernank.....oops....crank up the bubble machine to full speed....

RECISION's picture

To infinity... and beyond...!!!

(just coz no one else has said it recently)

ejmoosa's picture

There exists two types of price increases.  The first is due to monetary policy.  The second is due to demand.

The academic wizards at the Fed cannot tell the difference.

When wages rise due to demand for more employees, they decided that was inflationary and put the brakes on it by raising rates.

They should have left things alone.  The higher wages would have brought more supply of workers into the workplace.


They haven't a clue as to what they are doing.  And they are not going to figure it out any time soon.



Cult_of_Reason's picture

There is another component, credit.

Banks can create ("print") trillions of dollars out of thin air by extending credit. But the problem is structural. After decades of credit expansion, everyone is deleveraging now, and nobody (of cause the ones that have net positive cash flow and can qualify for credit) wants additional credit.

You can lead a horse to water, but you can't make it drink.

FreedomGuy's picture

"improvement in labor market conditions appears to have been held back by real impediments that are beyond the capacity of monetary policy to offset."

I at least appreciate the honesty and insight of this part of his statement. There are limits to what monetary policy can do.  I am not sure Bernanke believes this. Ben is willing to go all-in with the American and even world economy on his academic bet on what monetary policy can do. We will go with him whether or not we like it.

trebuchet's picture

even hardline monetarists and austrian school believe that a sustained employment deficit could be helped with monetary policy. 

To prevent the sustained defict from becoming structural unemployment. 


FreedomGuy's picture

Yes, and the Chicago School of economics believes the same. I don't think any school of thought doesn't believe that monetary policy has an effect. The disagreements are in the type and goals and limits of monetary policy. Sound money is generally at the root of any libertarian or free market policies and letting losers lose.

trebuchet's picture

Letting losers lose is the key. I agree.



kito's picture

Right, because qe is really about bens concern for growth.....

mewenz's picture

I got to give the guy some credit, at the very least some empathy  Imagine working for a guy following a mixture of possibly the 3 worst economic policies of the last century...

...Greenspanian bubble blowing mixed in w/ Japanese ZIRPmania, and topped off with good ole Soviet style centralized price fixing and control

blindman's picture

@.."Channeling the flow of credit to particular economic sectors is an inappropriate role for the Federal Reserve. " ..
this is the domain of the government, the sovereign
and the people. (same thing)
they will be the one, ones, that suffer or profit
from the value out of thin air scheme we call
currency so they are the rightful authority,
and need pay no interest for the privilege.
so yes, it involves trust and faith and vision
and work and when it goes bad there is a price to pay.
in the current system when the price for failure
comes due the crooks and con artists get bailed
out on the undeveloped backs of the unborn and the
retired who spend much of their resources and time
trying to make life better for the next generation
and the ones after that. there a double hit on the
seniors. it is a good thing that that most have
lived long lives and developed a high degree of
tolerance or there would be blood in the streets
from monday to friday. these wankers would have
trouble getting from point a to point b in public.
yea, the tolerance thing and alzheimer's and medications.
these three saved a generation of wankers fuck wits.
but for how much longer?
... "channeling the flow of credit" is just a
polite way of saying "distributing money".
or as they used to say, "robbing the bank". see
how easy it is ?

iamtheBernank's picture

hee hee FOOLS still don't understand the superiority of my intellect. I actually started the latest QE right under your noses and none of you noticed...

Bartanist's picture

Yes, in fact it was noted several times on Zerohedge. a couple of weeks before Thursday's announcement.

razorthin's picture

Starting would imply you at some point stopped.  Who are you fooling.

ebworthen's picture

Is this the reason for the mustache and beard?

Then again, if you shaved it would be frightening.

Just once leave some egg yolk in your beard at one of your speeches?

And make that Steve Leashman go last for once, will 'ya?

Say hello to your banker buddies at the Champagne and Caviar meetings in the basement of the Eccles Marriner.

Heyoka Bianco's picture

That substance around his mouth would not be egg yolk, not after he's "finished" with his bankster buddies.

Bartanist's picture

I firmly believe that everyone at the Fed knows exactly what they are doing, why they are doing it and the expected results. The way they let us know it is by having the one dessenting voice to provide us "hope" as a control mechanism. This is the sign telling us they know and are intentionally not doing what the people want and need. "They" are in control and rub it in our face.

If people believe that the Fed, the government, the wars, the media, the education system, religeions, the money systems and markets are not all part of a massive control system used to keep people in check and unable to mount a rebellion against the rulers of earth then they are delusional.

The entire system is divisive and controlling.... WAKE F'n UP! It is intentional. The Fed has no plans to work for the benefit of the people because that is counter to its primary function as a means of control. People MUST be kept weak and battling each other. To do otherwise would invite another Tower of Babel situation ... and while we do not remember it, I am sure they do.

LULZBank's picture

Not enough people who think that way. BTW I will buy the new iDrone 5 before you do and anything you say that I dont like will be called a conspiracy theory.

Fuck the Sheeple. Thats the only way they will listen.

odatruf's picture

So far, the people have been fucked five ways to Sunday.  When are they going to get it?

  1. QE = DP
  2. Bernanke = Bukkake

What other sick twist will they need before they listen and does listening mean they won't still iGobble?