Something curious appeared in the December minutes [6]- the Fed finally admits that market is no longer a discounting mechanism of a reality in which central bank intervention is irrelevant, but that market, or rather "market" merely discounts what centrals banks (and by "what" we mean will they or won't they inject a few trillion in liquidity) will do next.
In their discussion of financial market developments, participants observed that movements in asset prices over the intermeeting period appeared to have been importantly influenced by concerns about prospects for foreign economic growth and by associated expectations of monetary policy actions in Europe and Japan.
And now if only the Fed could apply the same logic to itself, it would grasp (publicly, it clearly did so in private some 101 years ago) that the market, or rather "market" merely frontruns how much liquidity it will provide to the market. We would then welcome this biggest enabler of monetary heroin to the 1st step of a long and very painful detox program.
