• Tag Archives Federal Reserve
  • Week in Review: September 23, 2017

    Almost a decade later, the Federal Reserve this week announced it will begin reversing quantitative easing. Slowly. Very slowly. The balance sheet currently stands at $4.5 trillion and they will begin allowing $10 billion in assets to roll off their sheets next month. Given the unprecedented nature of QE, even this modest reduction has many market observers on edge. Of course, the fallout from the Fed’s actions are still being felt, while the Trump Treasury is making threats that it would have disastrous consequences if acted on.

    This post was published at Ludwig von Mises Institute on September 23, 2017.


  • The Federal Reserve’s Unspoken Truth

    Originally posted at Briefing.com
    The Federal Reserve’s latest policy announcement has generated a lot of opinions about its implications for the capital markets. What it didn’t generate is a lot of movement in the stock market.
    The September Federal Open Market Committee (FOMC) meeting was a two-day affair that concluded on September 20 with the issuance of an updated policy directive, the release of updated economic and policy rate projections, an announcement that the Federal Reserve will start its balance sheet normalization process in October, and a press conference by Fed Chair Yellen to discuss it all.
    Check out Interview: Louise Yamada on Stocks, Tech, and Interest Rates
    There was a whole lot of information to digest. The key talking points from the Fed Day bonanza included the following:
    The target range for the fed funds rate was left unchanged at 1.00% to 1.25%. The vote was unanimous. The Federal Reserve said it will start its balance sheet normalization process in October in accord with the framework laid out in the June 2017 Addendum to the Committee’s Policy Normalization Principles and Plans

    This post was published at FinancialSense on 09/22/2017.


  • You Can’t Make This Up, But You Can Apparently Just Make Up the Data

    This is a syndicated repost courtesy of Alhambra Investments. To view original, click here. Reposted with permission.
    Back in 2014, the Federal Reserve was convinced that the labor market was better than it appeared to be in various data accounts. Though it was called the ‘best jobs market in decades’, researchers at the central bank were keen on showing it. Primarily lacking in wages and incomes, the labor segment was suspected of missing the very elements of sustainable economic growth.
    They came up with the Labor Market Conditions Index (LMCI), a factor model purported to give less weight to any of the 19 data points embedded within it that might be outliers. I assume they really thought the weaker points would be those outliers, and therefore the LMCI would overall gravitate toward suggesting the very robust jobs market they were sure was there.
    The LMCI, of course, behaved in the opposite fashion. It suggested instead that the labor market was weak and getting weaker, not strong and getting stronger. Worse, after suggesting something like recession, which even GDP revisions have subsequently shown as the correct position, the LMCI failed to indicate a robust rebound befitting the by-then ultra-low unemployment rate.

    This post was published at Wall Street Examiner by Jeffrey P. Snider ‘ September 22, 2017.


  • Janet Yellen’s 78-Month Plan for the National Monetary Policy of the United States

    Past the Point of No Return
    Adventures in depravity are nearly always confronted with the unpleasant reality that stopping the degeneracy is much more difficult than starting it. This realization, and the unsettling feeling that comes with it, usually surfaces just after passing the point of no return. That’s when the cucumber has pickled over and the prospect of turning back is no longer an option.
    In late November 2008, Federal Reserve Chairman Ben Bernanke put in place a fait accompli. But he didn’t recognize it at the time. For he was blinded by his myopic prejudices.
    Bernanke, a self-fancied Great Depression history buff with the highest academic credentials, gazed back 80 years, observed several credit market parallels, and then made a preconceived diagnosis. After that, he picked up his copy of A Monetary History of the United States by Milton Friedman and Anna Schwartz, turned to the chapter on the Great Depression, and got to work expanding the Fed’s balance sheet.

    This post was published at Acting-Man on September 22, 2017.


  • Fed QT Stocks, Gold Impact

    This week’s landmark Federal Open Market Committee decision to launch quantitative tightening is one of the most-important and most-consequential actions in the Federal Reserve’s entire 104-year history. QT changes everything for world financial markets levitated by years of quantitative easing. The advent of the QT era has enormous implications for stock markets and gold that all investors need to understand.
    This week’s FOMC decision to birth QT in early October certainly wasn’t a surprise. To the Fed’s credit, this unprecedented paradigm shift had been well-telegraphed. Back at its mid-June meeting, the FOMC warned ‘The Committee currently expects to begin implementing a balance sheet normalization program this year’. Its usual FOMC statement was accompanied by an addendum explaining how QT would likely unfold.
    That mid-June trial balloon didn’t tank stock markets, so this week the FOMC decided to implement it with no changes. The FOMC’s new statement from Wednesday declared, ‘In October, the Committee will initiate the balance sheet normalization program described in the June 2017 Addendum to the Committee’s Policy Normalization Principles and Plans.’ And thus the long-feared QT era is now upon us.
    The Fed is well aware of how extraordinarily risky quantitative tightening is for QE-inflated stock markets, so it is starting slow. QT is necessary to unwind the vast quantities of bonds purchased since late 2008 via QE. Back in October 2008, the US stock markets experienced their first panic in 101 years. Ironically it was that earlier 1907 panic that led to the Federal Reserve’s creation in 1913 to help prevent future panics.
    Technically a stock panic is a 20%+ stock-market plunge within two weeks. The flagship S&P 500 stock index plummeted 25.9% in just 10 trading days leading into early October 2008, which was certainly a panic-grade plunge! The extreme fear generated by that rare anomaly led the Fed itself to panic, fearing a new depression driven by the wealth effect. When stocks plummet, people get scared and slash their spending.

    This post was published at ZEAL LLC on September 22, 2017.


  • Asian Metals Market Update: September-21-2017

    A December interest rate hike and more hikes next year is more or less a certainty. This is the first time this year that the Federal Reserve has been very clear on the US economy and the US interest rate cycle. Any reduction on North Korean risk can result in another wave of sell off for gold and silver. The fall is good for a sustained medium term rise in gold and silver. Indian demand for gold will rise for the next month. I can expect the media to be filled with all kinds of bearish views on gold and silver. I prefer to use the sharp fall (if any) in gold and silver for the rest of the year to invest for a period of three years and more. Once again my preference will always be for physical gold as opposed to a gold ETF. I will be looking for price bottom formation every day for medium term opportunities.
    China has a holiday from 1st October to 6th October. On 9th October the USA is closed. In between we have the US September nonfarm payrolls on 6th October. Chinese are the great gobblers of gold. I expect massive Indian demand and massive Chinese demand for gold (if they continue to fall) on or before 30th September.

    This post was published at GoldSeek on 21 September 2017.


  • Is Identity Politics Brewing a Holocaust?

    Signs of American collapse are everywhere. Apparently no one notices. The world continues to vote with the US in the UN. When even Russia and China serve as handmaidens to US foreign policy by voting with Washington against North Korea, it appears that the image of America as the exceptional and indispensable country is a propaganda success even among Washington’s most threatened enemies. When Russia and China follow Washington’s lead, it shows the world that there is no alternative to Washington’s leadership.
    A country with a $20 trillion public debt, an even larger private debt, a work force drowning in debt and employed in third world lowly paid domestic services, a stock market pumped up beyond all reason by Federal Reserve liquidity and companies using their profits to repurchase their own stock, a military that’s been tied down for 16 years by a few lightly armed Muslims, a propaganda ministry instead of a media with public ignorance the consequence, and with a total collapse of morality in public and private institutions along with the disappearance of courage, is nevertheless able to make the entire world dance to its tune. Washington is the Wizard of Oz.
    Washington in the past 16 years has destroyed in whole or part seven countries, murdering, maiming, orphaning, widowing, and displacing millions of peoples. Yet Washington still presents itself as the great defender of human rights, democracy, and all that is good. The American people have voiced few words of protest against the massive crimes against humanity committed by ‘their’ government.

    This post was published at Paul Craig Roberts on September 20, 2017.


  • Questions Remain as the Fed Finally Begins to Reverse QE

    Today the Federal Reserve announced that it will finally begin the process of reversing quantitative easing. Following the process it outlined earlier this year, the Fed will start allowing assets (Treasurys and mortgage-backed securities) to mature off its balance sheet, rather than re-investing them as had been its prior policy. The current plan is to start with a $10 billion roll off in October, and increasing quarterly until it reaches $50 billion by October of next year. Considering the Fed’s balance sheet currently stands $4.5 trillion, the Fed is envisioning a slow, multi-year process. As Philadelphia Fed president Patrick Harker described it earlier this year, the goal is for it to be ‘the policy equivalent of watching paint dry.’
    Of course the old saying about the ‘best laid plans of mice and men’ also applies to central planners, and as Janet Yellen once again noted today, ‘policy is not on a pre-set course.’ Should markets react negatively, as they did when Bernanke hinted at reducing their purchases in 2013, the markets have reason to expect the Fed to act. In fact, when asked, Yellen kept the door open to both lowering interest rates and stalling its roll off should market conditions worsen. In fact, it appears that markets are already betting on the Fed to not follow through on its projected December rate hike.
    As the Fed has been signaling for months now that a taper was in the works, the mainstream narrative suggests that tapering has been priced in (though stocks dropped on the news.) There are still major questions left unanswered.

    This post was published at Ludwig von Mises Institute on September 21, 2017.


  • Stock And Financial Markets Pause Ahead Of FOMC Statement, Yellen Comments

    World stock markets were mixed in subdued trading overnight. U. S. stock indexes are pointed toward narrowly mixed openings when the New York day session begins.
    Gold prices are higher in pre-U. S.-session trading, on bargain hunting, short covering and some safe-haven demand following a fiery speech by U. S. President Trump at the U. N. on Tuesday. Trump threatened to completely destroy North Korea.
    Markets have paused ahead of the Federal Reserve’s Open Market Committee (FOMC) meeting that began Tuesday morning and ends Wednesday afternoon with a statement.

    This post was published at Wall Street Examiner on September 20, 2017.


  • What the Fed’s New $4.5 Trillion Balance Sheet Plan Means for the Stock Market Today

    This is a syndicated repost courtesy of Money Morning. To view original, click here. Reposted with permission.
    The Federal Reserve is set to announce more details about unwinding its massive $4.5 trillion balance sheet at today’s FOMC meeting. That will officially signal the end of the Fed’s stimulus program, going all the way back to 2007.
    The Five Top Stock Market Stories for Wednesday
    This afternoon, the U. S. Federal Reserve will conclude its two-day meeting on monetary policy. Fed Chair Janet Yellen will hold a press conference to announce the central bank’s plans on how it will unwind its massive balance sheet. This will be considered the official announcement by the Fed that it is ending its stimulus program that began after the financial crisis. Investors should remain cautious, as this truly is the great unknown regarding market risk. In fact, investors should read Lee Adler’s latest commentary on how the central bank’s stimulus programs work and what it means for your investments. Be sure to read Sure Money Investor.

    This post was published at Wall Street Examiner by Garrett Baldwin ‘ September 20, 2017.


  • Today the music stops

    Today’s the day.
    After months of preparing financial markets for this news, the Federal Reserve is widely expected to announce that it will finally begin shrinking its $4.5 trillion balance sheet.
    I know, that probably sound reeeeally boring. A bunch of central bankers talking about their balance sheet.
    But it’s phenomenally important. And I’ll explain why-
    When the Global Financial Crisis started in 2008, the Federal Reserve (along with just about every central bank in the world) took the unprecedented step of conjuring trillions of dollars out of thin air.
    In the Fed’s case, it was roughly $3.5 trillion, about 25% of the size of the entire US economy at the time.

    This post was published at Sovereign Man on September 20, 2017.


  • Federal Reserve Will Continue Cutting Economic Life Support

    I remember back in mid-2013 when the Federal Reserve fielded the notion of a “taper” of quantitative easing measures. More specifically, I remember the response of mainstream economic analysts as well as the alternative economic community. I argued fervently in multiple articles that the Fed would indeed follow through with the taper, and that it made perfect sense for them to do so given that the mission of the central bank is not to protect the U. S. financial system, but to sabotage it carefully and deliberately. The general consensus was that a taper of QE was impossible and that the Fed would “never dare.” Not long after, the Fed launched its taper program.
    Two years later, in 2015, I argued once again that the Fed would begin raising interest rates even though multiple mainstream and alternative sources believed that this was also impossible. Without low interest rates, stock buybacks would slowly but surely die out, and the last pillar holding together equities and the general economy (besides blind faith) would be removed. The idea that the Fed would knowingly take such an action seemed to be against their “best self interest;” and yet, not long after, they initiated the beginning of the end for artificially low interest rates.
    The process that the Federal Reserve has undertaken has been a long and arduous one cloaked in disinformation. It is a process of dismantlement. Through unprecedented stimulus measures, the central bank has conjured perhaps the largest stock and bond bubbles in history, not to mention a bubble to end all bubbles in the U. S. dollar.

    This post was published at Alt-Market on Wednesday, 20 September 2017.


  • Fed to Launch Quantitative Tightening – Should You Be Worried?

    Expectations are currently that the Federal Reserve will announce plans to begin unwinding its balance sheet this Wednesday. When you consider that the Fed currently owns around 29% of the market for mortgage-backed securities and 17% of the market for Treasuries, you might be tempted to scream OMG!
    But before you do, recognize that plans have been in place for this for quite some time, and the market has already had plenty of time to react. Not only that, but the Fed will continue to take the same ‘steady as she goes’ attitude that has been a hallmark of Janet Yellen’s time as Fed chair.
    Back in June, the Fed outlined how this process would likely unfold. They will begin by allowing $10 billion of assets ($4 billion of mortgages and $6 billion of Treasuries) to roll off the balance sheet each month. As time goes by, assuming the economy and financial markets don’t throw too big a fit, the roll-off amounts will continue to rise, up to a maximum of $50 billion per month.
    One thing that’s important to understand is that during this process, the Fed will not actually sell any bonds. Instead, they will simply allow bonds to mature, and not reinvest the proceeds. This means that the incremental effect to the mortgage and Treasury markets should be mild, and not represent the ‘severe tightening’ that some analysts are making it out to be.

    This post was published at FinancialSense on 09/19/2017.


  • Markets Pause As FOMC Meeting Begins Tuesday

    Global stock markets were mostly weaker overnight. U. S. stock indexes are pointed toward narrowly mixed openings when the New York day session begins.
    Traders and investors worldwide are a bit cautious ahead of the U. S. Federal Reserve’s monetary policy meeting.
    Gold prices are slightly higher in pre-U. S. day session trading, on some tepid short covering following recent selling pressure that pushed prices to a three-week low on Monday.

    This post was published at Wall Street Examiner on September 19, 2017.


  • Debt Limit Gums Up Treasury’s Plan for Supply Bump as Fed Tapers

    (Bloomberg) – The U. S. Treasury has been planning for years how to deal with the funding gap set to open up when the Federal Reserve begins unwinding its $2.5 trillion hoard of the government’s debt.
    Now there’s a new wrinkle to prepare for, as the latest deal to extend the nation’s debt limit complicates matters for Treasury Secretary Steven Mnuchin just as the Fed is expected to unveil the start of its balance-sheet reduction.
    With the debt-cap suspension expiring Dec. 8, there’s a growing sense among investors and analysts that Treasury will have to slow or hold off on the inevitable – increasing note and bond sales to deal with the shift in Fed policy and rising federal deficits. Most strategists had predicted that long-term tilt toward more coupon issuance would start in November, so a delay may provide a boost for bond bulls betting yields can stay near historic lows.
    ‘The debt-limit issue will in the near-term affect what Treasury does with coupon issuance,’ said Gene Tannuzzo, a money manager at Columbia Threadneedle, which oversees $473 billion. ‘At the end of the day, Treasury will have to do a lot more coupon sales. On the margin, for now, if there is less coupon issuance it is a modestly positive technical’ for Treasuries.

    This post was published at Wall Street Examiner on September 18, 2017.


  • Atlanta Fed’s Q3 Real GDP Forecast Dwindles To 2.2% From 3.0% (NY Fed Nowcast Q3 Forecast Plunges To 1.34%)

    According to the Atlanta Fed, the GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2017 is 2.2 percent on September 15, down from 3.0 percent on September 8. The forecasts of real consumer spending growth and real private fixed investment growth fell from 2.7 percent and 2.6 percent, respectively, to 2.0 percent and 1.4 percent, respectively, after this morning’s retail sales release from the U. S. Census Bureau and this morning’s report on industrial production and capacity utilization from the Federal Reserve Board of Governors.

    This post was published at Wall Street Examiner on September 15, 2017.


  • Harvey, Irma, Gold and Bad Options

    In the Previous Three Weeks:
    Gold rose over $1,330. Silver reached $18.00. The DOW almost reached another all-time high. Hurricane Harvey slammed into the Texas coast, flooded Houston, and caused massive damage. Hurricane Irma crashed into Florida and created flooding and huge damage, although a late move west reduced potential destruction. China is preparing a crude oil contract that will allow oil exporters to sell their crude on a Chinese exchange and be paid in yuan, which can be sold on a Chinese exchange for gold. This could be very important for the gold market. The Federal Reserve met and … yada yada yada. North Korea and President Trump exchanged pleasantries in their great distraction game. GOLD: Year 1913: Price of gold: $20.67 per oz. U. S. national debt $3 billion. Year 2017: Price of gold: $1,300 per oz. U. S. national debt $20 trillion. The national debt is over 6,000 times larger than in 1913, yet the gold price is just 62 times higher.

    This post was published at GoldStockBull on September 14th, 2017.


  • Where’s The Unwind? Fed Actually Adds $15 Billion To Balance Sheet (As ‘Inflation’ Remains Low And Home Prices Soar)

    The Federal Reserve has been jawboning their intent to unwind their almost $4.5 trillion balance sheet, nearly all of which is either Treasurys or mortgage-backed securities.
    The Fed’s Balance Sheet has pretty much been on hold (treading water) since 2014 and the end of QE3, their third round of asset purchases.
    But the System Open Market Account (SOMA) report from 9/13/2017 shows that The Fed actually added around $15 billion to its balance sheet.

    This post was published at Wall Street Examiner on September 15, 2017.


  • With a Central Bank, Bank “Deregulation” Can Be a Bad Thing

    Leading Federal Reserve policymaker Stanley Fischer has hit out at plans to unwind banking regulation, calling it a “terrible mistake.”
    President Donald Trump and republican politicians have advocated the repeal of Dodd Frank, a major piece of post-crisis legislation, and the loosening of some capital and liquidity requirements in a bid to ease banks’ ability to lend.
    In an interview with the Financial Times on August 16, 2017, Fischer said that loosening capital and liquidity requirements is dangerous and could lead to a new economic crisis. “I find that really, extremely dangerous and extremely short-sighted.”
    While Fischer is not a friend of a free market, in this case I am in agreement with Fischer’s comment.
    A True Free Financial Environment vs A Central-Bank Controlled Financial System The proponents for less control in financial markets hold that fewer restrictions imply a better use of scarce resources, which leads to the generation of more real wealth.
    It is true that a free financial environment is an agent of wealth promotion through the efficient use of scarce real resources, while a controlled financial sector stifles the process of real wealth formation. The proponents of deregulated financial markets have overlooked the fact that the present financial system has nothing to do with a free market. What we have at present is a financial system within the framework of the central bank, which promotes monetary inflation and the destruction of the process of real wealth generation through fractional reserve banking. In the present system the more unrestricted the banks are the more money out of ‘thin air’ generated and hence greater damage inflicted upon the wealth generation process. (With genuine free banking (i.e., the absence of the central bank) the potential for the creation of money out of ‘thin air’ is minimal).

    This post was published at Ludwig von Mises Institute on Sept 15, 2017.


  • Industrial Production Falls -0.9% MoM In August (Worst Since May 2009), But +1.54% YoY [Hurricane Harvey?]

    This is a syndicated repost courtesy of Snake Hole Lounge. To view original, click here. Reposted with permission.
    US Industrial Production fell -0.9% MoM in August, the worst decline since May 2009 during The Great Recession.

    The Federal Reserve blamed the decline on Hurricane Harvey.
    Hurricane Harvey, which hit the Gulf Coast of Texas in late August, is estimated to have reduced the rate of change in total output by roughly 3/4 percentage point.

    This post was published at Wall Street Examiner by Anthony B Sanders ‘ September 15, 2017.