Stocks and Precious Metals Charts - Chug-a-Lug - Hi-de-ho, Wall Street Does a Double Back Flip

Uncle Jay and his Monetary Moonshine

"The Federal Reserve, as one writer put it after the recent increase in the discount rate, is in the position of the chaperone who has ordered the punch bowl removed just when the party was really warming up.”

William McChesney Martin, Speech to Investment Bankers Association of New York, October 1955


"We're not even thinking about thinking about the consequences of our actions."

Jerome Powell, Chairman, Federal Reserve


"Jukebox and sawdust floor
Sumpin' like I ain't never seen
And I'm just going on fifteen
But with the help of my finaglin' uncle I get snuck in
For my first taste of sin
I said "Lemme have a big old sip"
Brrrrr-bbbb, done a double back flip

Chug-a-lug, chug-a-lug
Make you want to holler hi-de-ho
Burns your tummy, don'tcha know
Chug-a-lug, chug-a-lug."

Roger Miller, Chug-a-lug

The spokesmodels were gushing with excitement as the SP500 snugged its beer goggles and managed to reach its pre-crash high.

The NDX is already in some alternate universe.

Thanks for the hot money for the recovery, Uncle Jay.

Great success.

Gold and silver responded to the call, as the Dollar continued to slide lower.

The commentary about the precious metals on financial TV is so shallow and badly informed that I think the metals may have quite a bit further to go.

The time to sell will be when even the most purblind Wall Street lounge lizards 'get it.'

Stock market will have its August stock option expiration on Friday.

Chug-a-lug, chug-a-lug.

Have a pleasant evening.

Stocks and Precious Metals Charts - Fed Lightly Spikes Punch Bowl, But Fails to Roll Out the Barrel

"Experience, however, shows that neither a state nor a bank ever have had the unrestricted power of issuing paper money without abusing that power; in all states, therefore, the issue of paper money ought to be under some check and control; and none seems so proper for that purpose as that of subjecting the issuers of paper money to the obligation of paying their notes either in gold coin or bullion."

David Ricardo


"When depreciated, mutilated, or debased coinage or currency is in concurrent circulation with money of high value in terms of precious metals, the good money automatically disappears.

Bad money drives out good."

Thomas Gresham

The Fed cut 25 basis points today as was broadly expected by the markets.  Or at least aware market observers.

What surprised the markets was the somewhat hawkish flavor to their rate outlook, which apparently took any more cuts for 2019 off the table.

Indeed, there is clearly less enthusiasm at the Fed for easy money to stimulate the economy than many of the beta-seekers in the markets had expected.

So the Dollar went higher, the precious metals went lower, and stocks sold off.

During the press conference Fed Chair Powell indicated the reasons for what they had done and their data dependency in future decisions.   And probably most importantly there will be a bias towards expanding the Balance Sheet to accommodate the needs for liquidity demands of an economic expansion, in addition to as needed interventions by the NY Fed to relieve any short term overnight liquidity concerns.

In my own estimation the liquidity problems stem from the unusual amounts of debt that the Treasury is having to shove into the market, coupled with the Fed's own contraction of its Balance Sheet after years of QE.  This seems to be confirmed by the FOMC, but so what.

I think some of the hysterical warnings were due to the Banks and their enablers lobbying for more easy money and lower reserve requirements, so that they might carry on their campaign of leveraging themselves into an increasingly large piece of our financialized economy.

Trumpolini had a tweet fit as one might expect.  You can discount anything he says about interest rates heavily, because he knows less about money and banking than he does about foreign policy, or astrophysics for that matter.   But like most NY real estate developers he likes easy money.

Can you imagine if the Trump Treasury held the power of the printing press, independent of a central bank or the discipline of the debt markets or some other external standard?

MMT = LOL²

There will be a stock market option expiration, a quad witch no less, this Friday.

I bought back gold positions today that I had let go of some days ago.

Let's see how that works out.  

Have a pleasant evening.

Stocks and Precious Metals Charts - Managed Complacency - The Grand Equilibrium

“It has been more profitable for us to bind together in the wrong direction than to be alone in the right one. Those who have followed the assertive idiot rather than the introspective wise person have passed us some of their genes. This is apparent from a social pathology: psychopaths rally followers.”

Nassim Nicholas Taleb, The Black Swan


"Definite signs that business and industry have turned the corner from the temporary period of emergency that followed deflation of the speculative market were seen today by President Hoover. The President said the reports to the Cabinet showed the tide of employment had changed in the right direction." -

News dispatch from Washington, January 21, 1930


"The even larger problem is that there is a kind of chronic complacency that has been rotting American liberalism for years, a hubris that tells Democrats they need do nothing different, they need deliver nothing really to anyone – except their friends on the Google jet and those nice people at Goldman. The rest of us are treated as though we have nowhere else to go and no role to play except to vote enthusiastically on the grounds that these Democrats are the 'last thing standing' between us and the end of the world.It is a liberalism of the rich, it has failed the middle class, and now it has failed on its own terms of electability."

Thomas Frank, 2016

The markets want to see a 25 basis point cut from the Fed's FOMC meeting, which will announce its decision around 2 PM.

They are also going to be listening very carefully to Chairman Powell's press conference, and are expecting some kind of reassurance of the Fed's support for equities and the Banks.

Stocks were a bit wobbly today but managed to rally into the green in the late afternoon.

The Dollar was lower, while gold and silver edged higher. The VIX fell.

After the bell Fedex announced a miss in earnings. They also cut their outlook, citing global macro slowdown. The stock was being spanked rather thoroughly after hours.

Adobe also missed its results after hours.   Smells like teen spirit.

There will be the September stock market options expiration on Friday.

Need little, want less, love more. For those who abide in love abide in God, and God in them.

Have a pleasant evening.

FOMC Statement - Backing Off On the Rate Increases, Lowering Forecasts

The Fed recognized that growth is slow, and that inflation remains subdued.

I include a chart of the real median household income to demonstrate why the recovery is so wobbly.  Demand and investment are weak because most people have less money to spend.  Wow, what a surprise.

The pampered princes of the establishment keep pointing to the 'great jobs growth' while ignoring the low pay, part time nature of those jobs, and the slumping Labor Participation Rate.

The 'trickle down theory' does little more than enrich the already rich, and stretch the fabric of society to the point of instability.  

And I believe that this is purposeful, because they are caught in a credibility trap.  They cannot address the root problems because it risks their place in the 'system' that they have crafted that rewards their wealthy and powerful patrons excessively at the expense of most others.

The Fed attributes this uncertainty to 'global economic and financial developments continue to pose risks.'   And they have not only scaled back their inflation expectations, they have also scaled back forecasted GDP growth, which I think is still a bit optimistic.

If one looks at their 'dot plot' they are indicating a less frequent raising of rates this year, perhaps only two occasions rather than three.

I have included the Fed's data sheet below the text that shows the difference between what they had forecasted in December and what they have changed that to now.

The US dollar dropped and gold took off higher like a scalded cat.  Stocks remain mixed.

Janet Yellen will be giving a press conference shortly.

Release Date: March 16, 2016

For release at 2:00 p.m. EDT

Information received since the Federal Open Market Committee met in January suggests that economic activity has been expanding at a moderate pace despite the global economic and financial developments of recent months. Household spending has been increasing at a moderate rate, and the housing sector has improved further; however, business fixed investment and net exports have been soft. A range of recent indicators, including strong job gains, points to additional strengthening of the labor market. Inflation picked up in recent months; however, it continued to run below the Committee's 2 percent longer-run objective, partly reflecting declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market indicators will continue to strengthen. However, global economic and financial developments continue to pose risks. Inflation is expected to remain low in the near term, in part because of earlier declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of declines in energy and import prices dissipate and the labor market strengthens further. The Committee continues to monitor inflation developments closely.

Against this backdrop, the Committee decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent.  The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. In light of the current shortfall of inflation from 2 percent, the Committee will carefully monitor actual and expected progress toward its inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction, and it anticipates doing so until normalization of the level of the federal funds rate is well under way. This policy, by keeping the Committee's holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.

Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; James Bullard; Stanley Fischer; Loretta J. Mester; Jerome H. Powell; Eric Rosengren; and Daniel K. Tarullo. Voting against the action was Esther L. George, who preferred at this meeting to raise the target range for the federal funds rate to 1/2 to 3/4 percent.

FOMC Statement for January 27, 2016

Net-net the Fed is bothered by the dampening effects of the stronger dollar on exports, and the lack of inflation.

They continue to promote the fantasy of a recovery in the labor markets, but that vain hope will dissipate no doubt given time.

They may *get it* but their complicity in and personal advancement from a broken system hampers their ability to recognize and act on the real state of the economy, which is a weakening recovery and broad mispricing of risk in financial assets.

The Fed has been and is still playing a major role in the failure to reform and recover as advisor, regulator, and central banker.

Like the Congress, they are creatures of Big Money who go along to get along, while persuading themselves perhaps, and certainly the public, of their virtue.  But in an environment made generally corrupt it would be improbable for such a key institution not to have fallen into this credibility trap.

Federal Reserve Open Market Committee
Release Date: January 27, 2016

For release at 2:00 p.m. EST

Information received since the Federal Open Market Committee met in December suggests that labor market conditions improved further even as economic growth slowed late last year. Household spending and business fixed investment have been increasing at moderate rates in recent months, and the housing sector has improved further; however, net exports have been soft and inventory investment slowed.

A range of recent labor market indicators, including strong job gains, points to some additional decline in underutilization of labor resources. Inflation has continued to run below the Committee's 2 percent longer-run objective, partly reflecting declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation declined further; survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market indicators will continue to strengthen. Inflation is expected to remain low in the near term, in part because of the further declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of declines in energy and import prices dissipate and the labor market strengthens further. The Committee is closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation, and for the balance of risks to the outlook.

Given the economic outlook, the Committee decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent. The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.

In light of the current shortfall of inflation from 2 percent, the Committee will carefully monitor actual and expected progress toward its inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run.  However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction, and it anticipates doing so until normalization of the level of the federal funds rate is well under way. This policy, by keeping the Committee's holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.

Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; James Bullard; Stanley Fischer; Esther L. George; Loretta J. Mester; Jerome H. Powell; Eric Rosengren; and Daniel K. Tarullo.

Fed Raises Benchmark Rate 25 Basis Points, Says 'Gradual' Instead of 'Measured'

The distinction is that 'gradual' means as needed, or as seen to be necessary by the ongoing data.

'Measured' was meant to imply a steady 25 basis point at a time rate of increases to an objective which some thought to be 100 bp.

The Fed also raised the interest paid to the Banks on Required and Excess Reserves to 50 bp.

In the second press release below, the NY Fed says that they have about $2 Trillion at the ready to back up the Fed's targets.

As suspected, the Fed raised, but it is very likely to be quite gradual, since the data does not fully support it despite all the verbage which has been put out there to justify it.

So to accentuate a very important point, this is not your father's interest rate tightening cycle.

The Fed is raising rates in order to 'end' ZIRP and to begin to provide themselves some maneuvering room out of the policy corner into which they had painted themselves in their thrashing within a credibility trap of lack of reform, top down stimulus, and thereby a continuing lack of broad, organic recovery which is apparent to all those who are not blinded by an ideological bias, a preoccupation with abstract and otherworldly models, and/or their paychecks.

Federal Open Market Committee - December Policy Statement
Release Date: December 16, 2015

Information received since the Federal Open Market Committee met in October suggests that economic activity has been expanding at a moderate pace. Household spending and business fixed investment have been increasing at solid rates in recent months, and the housing sector has improved further; however, net exports have been soft.

A range of recent labor market indicators, including ongoing job gains and declining unemployment, shows further improvement and confirms that underutilization of labor resources has diminished appreciably since early this year. Inflation has continued to run below the Committee's 2 percent longer-run objective, partly reflecting declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation remain low; some survey-based measures of longer-term inflation expectations have edged down.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will continue to expand at a moderate pace and labor market indicators will continue to strengthen.

Overall, taking into account domestic and international developments, the Committee sees the risks to the outlook for both economic activity and the labor market as balanced. Inflation is expected to rise to 2 percent over the medium term as the transitory effects of declines in energy and import prices dissipate and the labor market strengthens further. The Committee continues to monitor inflation developments closely.

The Committee judges that there has been considerable improvement in labor market conditions this year, and it is reasonably confident that inflation will rise, over the medium term, to its 2 percent objective. Given the economic outlook, and recognizing the time it takes for policy actions to affect future economic outcomes, the Committee decided to raise the target range for the federal funds rate to 1/4 to 1/2 percent. The stance of monetary policy remains accommodative after this increase, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.

In light of the current shortfall of inflation from 2 percent, the Committee will carefully monitor actual and expected progress toward its inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction, and it anticipates doing so until normalization of the level of the federal funds rate is well under way. This policy, by keeping the Committee's holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.

Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Stanley Fischer; Jeffrey M. Lacker; Dennis P. Lockhart; Jerome H. Powell; Daniel K. Tarullo; and John C. Williams.

Approximately $2 Trillion is available to the NY Fed to implement this policy change, although I would hesitate to think of this as anything near a hard limitation to the Treasury's willingness to spend or the Fed's willingness to monetize, and to tinker with the markets through their trading desks and those of their associated Banks.

Federal Reserve Bank of New York
Statement Regarding Overnight Reverse Repurchase Agreements
December 16, 2015

During its meeting on December 15–16, 2015, the Federal Open Market Committee (FOMC) directed the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York (New York Fed), effective December 17, 2015, to undertake open market operations as necessary to maintain the federal funds rate in a target range of ¼ to ½ percent, including overnight reverse repurchase operations (ON RRPs) at an offering rate of 0.25 percent, in amounts limited only by the value of Treasury securities held outright in the System Open Market Account (SOMA) that are available for such operations and by a per-counterparty limit of $30 billion per day...

...the Desk anticipates that around $2 trillion of Treasury securities will be available for ON RRP operations to fulfill the FOMC’s domestic policy directive.   In the highly unlikely event that the value of bids received in an ON RRP operation exceeds the amount of available securities, the Desk will allocate awards using a single-price auction based on the stop-out rate at which the overall size limit is reached, with all bids below this rate awarded in full at the stop-out rate and all bids at this rate awarded on a pro rata basis at the stop-out rate.

Duke U. Study Suggests The Fed Consistently Leaked Non-Public Information to Select Insiders

This excerpt from a Duke University study is just in from my friend Professor Anthony Sanders at George Mason University, who writes at Confounded Interest.

In reading the paper I did not necessarily get the sense that this was a nefarious form of communication.  More like the kind of collegial exchanges of information that are so common to the revolving door nature of our modern financial regime.  There are two sets of rules, and two methods of handling things.  And insiders never speak ill of the actions of other insiders.

This is the 'money shot' from the abstract of the paper which is tracks the distribution of stock market gains over the FOMC information cycle:

"High return weeks do not line up with public information releases from the Federal Reserve or with the frequency of speeches by Fed officials.

Systematic informal communication of Federal Reserve officials with the media and the financial sector is a more plausible information transmission mechanism. We discuss the social costs and benefits of this method of communication."

And in related news, the Congress has just used its power to block an investigation of its own insider trading.  Again.

Remember this blog post from 2011?  Credibility Trap: US Congressmen and Their Staffs Regularly Engage In Insider Trading

It is hard to escape the credibility trap as a plausible explanation for the lack of serious financial reform and transparency in a system that has been shown to be plagued with a lack of sound regulatory oversight, price manipulation, and corruption in almost every major market.

I would certainly hope that there is a different explanation for what appears to be systematic insider trading since at least 1994.

Here is what Tony has to say about this Duke University paper at his blog:

Fed Consistently Leaked Non-Public Information to Selected Insiders

Researchers at Duke University and the University of California at Berkeley point to quantitative evidence that The Fed consistently leaks non-public information about its meetings, driving an investment pattern that has led to market gains.

Here is the paper: 292092121-Stock-Returns-Over-The-FOMC-Cycle

Here are stock returns over the FOMC cycles. Notice anything unusal?

And here are the 5 day returns with bootstrapped confidence bands.

The Fed In December

Fed Does Nothing, Lacker Dissents - And the Band Played On

All is well in the US. The rest of the world, however, is a problem.

Explication to follow with Janet Yellen's press conference.

In their separate economic projections statement they appear to have lowered their inflation expectations.

Given their track record on forecasting I think this is more of a Rorschach test than a reliable guide to the future.

We're in the new normal of high employment, low wages, sluggish growth, and slack inflation.

And we're are doing just fine.   Depending on how you define 'we.'

Even though the Bloombergians were later laughing at this, I tend to lean towards Ray Dalio's prognosis.

“I don’t care whether they raise 25 basis points,” Dalio said Wednesday in an interview with Tom Keene and Michael McKee that was broadcast on Bloomberg radio and television. “What scares me, or what worries me, is what the next downturn in the economy looks like, with asset prices where they are and a lesser ability of central banks to ease monetary policy.”

He predicted that returns across asset classes over the next decade will only average 3 percent or 4 percent. Narrower spreads will make it much harder for asset purchases to have a big effect on the market, he said."

This is all a bit moot really, because except for the betting parlors it doesn't matter whether the Fed raises 25 basis points or not.  You can print money and give it to the banking system all day long.

The system is broken, the real product of the nation has been hijacked by financialization, the international monetary exchange is in chaos, and almost all of the gains are going to the top. And the Fed and the government are doing virtually nothing to change this.

And the band played on.

Release Date: September 17, 2015

For immediate release

Information received since the Federal Open Market Committee met in July suggests that economic activity is expanding at a moderate pace. Household spending and business fixed investment have been increasing moderately, and the housing sector has improved further; however, net exports have been soft. The labor market continued to improve, with solid job gains and declining unemployment. On balance, labor market indicators show that underutilization of labor resources has diminished since early this year. Inflation has continued to run below the Committee's longer-run objective, partly reflecting declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation moved lower; survey-based measures of longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term. Nonetheless, the Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators continuing to move toward levels the Committee judges consistent with its dual mandate. The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced but is monitoring developments abroad. Inflation is anticipated to remain near its recent low level in the near term but the Committee expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of declines in energy and import prices dissipate. The Committee continues to monitor inflation developments closely.

To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate. In determining how long to maintain this target range, the Committee will assess progress--both realized and expected--toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.

The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. This policy, by keeping the Committee's holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.

When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.

Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Stanley Fischer; Dennis P. Lockhart; Jerome H. Powell; Daniel K. Tarullo; and John C. Williams. Voting against the action was Jeffrey M. Lacker, who preferred to raise the target range for the federal funds rate by 25 basis points at this meeting.

FOMC Statement for July 29, 2015 - Lords of the Small Council

The Fed did nothing, but continued to smooth the way for some rate hikes.

The hikes have little to do with the economy or The Recovery™.   Or what George Mason Prof Tony Sanders aptly calls The Bartender Recovery of part time service jobs and very low real median wage growth that is losing ground to housing prices and inflation.

The Fed would like to get off the zero bound so that they have room to cut the next time the financial markets crash because of regulatory capture and gross policy errors that have allowed the financial sector to mutate and distort its role in the real economy.

So barring a market meltdown I would expect a 25 basis point increase in September. I don't think that there is unanimity behind this decision on the FOMC. I suspect Yellen is more dovish than other members, probably led by monetary technician Stanley Fisher, having a more hawkish lean not so much from an economic standpoint as from the practical standpoint of banking system technocrats.

Release Date: July 29, 2015

For immediate release

Information received since the Federal Open Market Committee met in June indicates that economic activity has been expanding moderately in recent months. Growth in household spending has been moderate and the housing sector has shown additional improvement; however, business fixed investment and net exports stayed soft.

The labor market continued to improve, with solid job gains and declining unemployment. On balance, a range of labor market indicators suggests that underutilization of labor resources has diminished since early this year. Inflation continued to run below the Committee's longer-run objective, partly reflecting earlier declines in energy prices and decreasing prices of non-energy imports. Market-based measures of inflation compensation remain low; survey‑based measures of longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators continuing to move toward levels the Committee judges consistent with its dual mandate.

The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced. Inflation is anticipated to remain near its recent low level in the near term, but the Committee expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of earlier declines in energy and import prices dissipate. The Committee continues to monitor inflation developments closely.

 

To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate. In determining how long to maintain this target range, the Committee will assess progress--both realized and expected--toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.

 

The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.

The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. This policy, by keeping the Committee's holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.

When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.

Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Stanley Fischer; Jeffrey M. Lacker; Dennis P. Lockhart; Jerome H. Powell; Daniel K. Tarullo; and John C. Williams.

FOMC June 2015 Statement

Net-net, the Fed today said that while the first quarter was lousy, the second quarter was less lousy, and showed some sparks of growth if you looked hard enough.

The Fed is just itching to raise rates this year, by at least .25%.  

It has little to do with the economy per se, unless the wheels more obviously start falling off The Recovery™.

Let us not forget that, in the time honoured tradition of all pampered bureaucrats, the Fed would like to engage in some serious CYA (cover your ass) activity now before the next crisis unfolds due to their policy errors, which are continuing and many, and will not be resolved by higher interest rates.

It is a policy thing.  The Fed would like to get off the zero bound, both to end the speculation about when they will do it, and further, to give themselves some cushion to cut rates in case the current asset bubble pops.

I will stick with my long standing forecast that the Fed will raise by 25 basis points at least once this year, and maybe twice, unless the world economy really hits the skids so that even mom and pop at home notice it.  

They will not wish to be raising in a Presidential election year, but need to get off ZIRP for their own policy purposes by pulling the trigger on that at least once.

The strong dollar is stifling The Recovery™ so the raising of rates has to be done carefully.

Then there is the turmoil in Europe and the other asset bubble in Asia.

Release Date: June 17, 2015
For immediate release

Information received since the Federal Open Market Committee met in April suggests that economic activity has been expanding moderately after having changed little during the first quarter. The pace of job gains picked up while the unemployment rate remained steady. On balance, a range of labor market indicators suggests that underutilization of labor resources diminished somewhat. Growth in household spending has been moderate and the housing sector has shown some improvement; however, business fixed investment and net exports stayed soft. Inflation continued to run below the Committee's longer-run objective, partly reflecting earlier declines in energy prices and decreasing prices of non-energy imports; energy prices appear to have stabilized. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators continuing to move toward levels the Committee judges consistent with its dual mandate. The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced. Inflation is anticipated to remain near its recent low level in the near term, but the Committee expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of earlier declines in energy and import prices dissipate. The Committee continues to monitor inflation developments closely.

To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate. In determining how long to maintain this target range, the Committee will assess progress--both realized and expected--toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.

The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. This policy, by keeping the Committee's holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.

When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.

Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Stanley Fischer; Jeffrey M. Lacker; Dennis P. Lockhart; Jerome H. Powell; Daniel K. Tarullo; and John C. Williams.

Post FOMC Metals Rig: Right On Schedule

This is what the pampered princes of privilege do when they fail.

 

They try to hide it.  They lash out.   They cheat.

 

They are petty.  But vicious when frightened.

Most of the successes they have obtained throughout their lives have been gained by cheating, using inside information, rigging the game, exercising influence, position, and privilege.

They twist the fabric of society to weave their robes.

 

They make and break the rules to suit themselves and their friends.

 

They make our markets into bucket shops.  Our laws are just pieces of paper.

 

They try to make other people pay for their mistakes.

 

As they have been doing all throughout their lives.

Success.   They deserve it, one banal and disreputable way or another.

For the good of the system.   

 

 

 

FOMC Statement 29 January 2014

This was Ben Bernanke's last meeting of the FOMC. Notice that this time the statement was approved unanimously.

Even as it promises easy monetary policy as far as the eye can see, it also provides an historical 'fig leaf' for Bernanke's legacy.  They will say that he expanded the Fed's Balance Sheet as required, even to the extent of engaging in non-traditional practices such as buying mortgage and long Term Treasury debt, AND he had started the process of 'tapering' ongoing the purchase programs before he left the chairmanship.

My own personal opinion is that history will not be kind to either Greenspan or Bernanke and their trickle down approach to monetary policy, weak regulatory environment, and The Recovery™.  Future economists will look on them and the Obama Administration with kindly condescension, much as they look at the tragedy that was the Herbert Hoover presidency, even while they continue to propagate different, but similar, policy errors with great gravity and self-confidence.

Press Release
Federal Reserve Press Release
Release Date: January 29, 2014

For immediate release

Information received since the Federal Open Market Committee met in December indicates that growth in economic activity picked up in recent quarters. Labor market indicators were mixed but on balance showed further improvement. The unemployment rate declined but remains elevated. Household spending and business fixed investment advanced more quickly in recent months, while the recovery in the housing sector slowed somewhat. Fiscal policy is restraining economic growth, although the extent of restraint is diminishing. Inflation has been running below the Committee's longer-run objective, but longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate. The Committee sees the risks to the outlook for the economy and the labor market as having become more nearly balanced. The Committee recognizes that inflation persistently below its 2 percent objective could pose risks to economic performance, and it is monitoring inflation developments carefully for evidence that inflation will move back toward its objective over the medium term.

Taking into account the extent of federal fiscal retrenchment since the inception of its current asset purchase program, the Committee continues to see the improvement in economic activity and labor market conditions over that period as consistent with growing underlying strength in the broader economy. In light of the cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions, the Committee decided to make a further measured reduction in the pace of its asset purchases. Beginning in February, the Committee will add to its holdings of agency mortgage-backed securities at a pace of $30 billion per month rather than $35 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $35 billion per month rather than $40 billion per month.

The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee's sizable and still-increasing holdings of longer-term securities should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative, which in turn should promote a stronger economic recovery and help to ensure that inflation, over time, is at the rate most consistent with the Committee's dual mandate.

The Committee will closely monitor incoming information on economic and financial developments in coming months and will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability. If incoming information broadly supports the Committee's expectation of ongoing improvement in labor market conditions and inflation moving back toward its longer-run objective, the Committee will likely reduce the pace of asset purchases in further measured steps at future meetings. However, asset purchases are not on a preset course, and the Committee's decisions about their pace will remain contingent on the Committee's outlook for the labor market and inflation as well as its assessment of the likely efficacy and costs of such purchases.

To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. The Committee also reaffirmed its expectation that the current exceptionally low target range for the federal funds rate of 0 to 1/4 percent will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee's 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored.

In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. The Committee continues to anticipate, based on its assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate well past the time that the unemployment rate declines below 6-1/2 percent, especially if projected inflation continues to run below the Committee's 2 percent longer-run goal. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Richard W. Fisher; Narayana Kocherlakota; Sandra Pianalto; Charles I. Plosser; Jerome H. Powell; Jeremy C. Stein; Daniel K. Tarullo; and Janet L. Yellen.

Statement Regarding Purchases of Treasury Securities and Agency Mortgage-Backed Securities (PDF)