Chances of a Recession Later This Year or Early Next Year

 

Does it look like we get a recession later this year or early next year?

Only if you look at the Treasury inversion and economic results data and assume the Fed can perform a miracle that they have never done before, or that they will stimulate a fourth bubble through a massive inflationary policy error.

So its a miracle of policy precision, or most likely the Fed will be providing an economic recession in response to their bubblenomic excesses, as usual.

But given the track record of these jokers a fourth bubble is not out of the question. And I fear it would come with grave consequences.

Rates, Recessions, Rentiers, Oh My!

"The sense of responsibility in the financial community for the community as a whole is not small. It is nearly nil.  Perhaps this is inherent. In a community where the primary concern is making money, one of the necessary rules is to live and let live.  To speak out against madness may be to ruin those who have succumbed to it. So the wise in Wall Street are nearly always silent.   The foolish thus have the field to themselves.  None rebukes them."

John Kenneth Galbraith, The Great Crash of 1929

The Fed Statement

Good News! The Fed stands ready to buy Treasuries, but not yet so don't worry about monetization. Will they or won't they?

Oh by the way:

The Federal Reserve continues to purchase large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets, and it stands ready to expand the quantity of such purchases and the duration of the purchase program as conditions warrant.

As you may recall, the foreign central banks have been dumping Agency debt en masse and using the proceeds to buy Treasuries, generally in the five to ten year duration of the curve.

So the Fed is buying those Agencies, but not buying Treasuries which would be monetization right? But somehow buying Agency debt is not monetization if it is the foreign central banks who are buying the Treasuries, right?

If the Fed uses its Balance Sheet to buy financial assets at above market prices, essentially providing a subsidy to the holders of those assets, this is not inflationary since that debt already existed, right? Oh, as long as it is at a loss, because as everyone can figure out buying them at 1000 times more than they are worth or marked on the holder's books would surely be inflationary, right? If the Fed buys my stamp collection at 1000 times it true value, that would be inflationary unless they sterilized the transaction. Is the Fed sterilizing all their transactions? Hah!

Will they or won't they indeed. They already are, indirectly. More misdirection from the transparent Fed.

From Tinker, to Evers, to Chance.


Press Release
Release Date: January 28, 2009

For immediate release

The Federal Open Market Committee decided today to keep its target range for the federal funds rate at 0 to 1/4 percent. The Committee continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time.

Information received since the Committee met in December suggests that the economy has weakened further. Industrial production, housing starts, and employment have continued to decline steeply, as consumers and businesses have cut back spending. Furthermore, global demand appears to be slowing significantly. Conditions in some financial markets have improved, in part reflecting government efforts to provide liquidity and strengthen financial institutions; nevertheless, credit conditions for households and firms remain extremely tight. The Committee anticipates that a gradual recovery in economic activity will begin later this year, but the downside risks to that outlook are significant.

In light of the declines in the prices of energy and other commodities in recent months and the prospects for considerable economic slack, the Committee expects that inflation pressures will remain subdued in coming quarters. Moreover, the Committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.

The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability. The focus of the Committee's policy is to support the functioning of financial markets and stimulate the economy through open market operations and other measures that are likely to keep the size of the Federal Reserve's balance sheet at a high level.

The Federal Reserve continues to purchase large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets, and it stands ready to expand the quantity of such purchases and the duration of the purchase program as conditions warrant.

The Committee also is prepared to purchase longer-term Treasury securities if evolving circumstances indicate that such transactions would be particularly effective in improving conditions in private credit markets.

The Federal Reserve will be implementing the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses. The Committee will continue to monitor carefully the size and composition of the Federal Reserve's balance sheet in light of evolving financial market developments and to assess whether expansions of or modifications to lending facilities would serve to further support credit markets and economic activity and help to preserve price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Dennis P. Lockhart; Kevin M. Warsh; and Janet L. Yellen. Voting against was Jeffrey M. Lacker, who preferred to expand the monetary base at this time by purchasing U.S. Treasury securities rather than through targeted credit programs.