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.

Don't Believe Your Lying Eyes: Gold Does Not Offer a Safe Harbor Against Financial Crises

"Gold has worked down from Alexander's time... When something holds good for two thousand years I do not believe it can be so because of prejudice or mistaken theory."

Bernard Baruch


"After we came out of the church, we stood talking for some time together of Bishop Berkeley's ingenious sophistry to prove the nonexistence of matter, and that every thing in the universe is merely ideal.

I observed, that though we are satisfied his doctrine is not true, it is impossible to refute it.

I never shall forget the alacrity with which Johnson answered, striking his foot with mighty force against a large stone, till he rebounded from it--

"I refute it, thus!"

Boswell, Life of Samuel Johnson


"For centuries, gold had a profound impact on history, as a symbol and a storehouse of wealth accepted universally around the world. Gold functions as a medium of exchange, particularly in areas where currencies are distrusted.

Yet gold has not been without controversy. The influential economist, John Maynard Keynes, referred to gold as a 'barbarous relic.' Later in the 20th century, former Chairman of the Federal Reserve’s Board of Governors, William McChesney Martin, praised gold as 'a beautiful and noble metal. What is barbarous,' Martin said, 'is man’s enslavement to gold for monetary purposes.' Clearly, this precious metal has aroused great passion. It undoubtedly will continue to do so long into the future."

New York Federal Reserve


"The commerce and industry of the country, however, it must be acknowledged,though they may be somewhat augmented, cannot be altogether so secure, when they are thus, as it were, suspended upon the Daedalian wings of paper money, as when they travel about upon the solid ground of gold and silver.

Over and above the accidents to which they are exposed from the unskilfulness of the conductors of this paper money, they are liable to several others, from which no prudence or skill of those conductors can guard them."

Adam Smith, Wealth of Nations

Gold has moved in price from $250 in the year 2000 to roughly $1,350 today. In other currencies the move has been much more pronounced.

The period of 1996-2000 is a good time to pick a start for this monetary episode, because this is when the global monetary regime, which had been in place since the end of WW II with a significant change made by fiat in 1971, began to change, substantially in the most proper sense of the word. 

Some like to cherry pick a study of recent gold performance from the prior top of $1,900, but that says more about them and their intentions than it does about gold.  They know that all bull markets climb a wall of worry and can offer significant retracements from new highs while remaining intact.

And given the structure of global supply and demand, and the vast movements in the global economy, it is likely to go much higher, unless it becomes a fixed asset in a global monetary system once again and its price becomes set by fiat.

More likely it will become a floating asset with a more 'official' status than it has today when some central bankers will hardly recognize its existence in public, although they own it, and worry over it in private.

As shown in the second last quote above from the NY Fed, which unfortunately is no longer found on their web site, some central bankers find the attractive, and yet restraining, qualities of gold as a standard to be cloying, because it restrains their degrees of freedom to act as they would like.

And even when it is not a standard it does tend to utter some 'unpleasant truths.' But there is no denying its role as a refuge during periods of monetary instability, especially for those who are not currently holding the financial power.

And gold is certainly not the only hedge, and only safe harbor available.  But that is a far cry from saying it has not served many people very well during serious financial crises, and worked exceptionally to retain its value during a currency crisis and reissue/reflation.  Even a cursory look at historical crises show that.   The value is to study the nature of crises, and to understand the situation one has, not the one you wish you had, or even worse, the one that serves your mistaken point of view.

By the way, I am not advocating a gold standard as a cure for our ills. What our financial system requires is genuine reform from top to bottom. It is capable of corrupting, for at least a protracted period of time, virtually any single solution that one can imagine.  Look what they have done to the civic impulse for genuine change that became that industry-born frankenstein, Dodd-Frank.

They create a desert, and whimsically call it the 'new normal.'

So let us then consider this paper below, titled Gold Has Never Been a Great Hedge Against Bad Economic Times.

Not meaning to be rude, but there are some telling flaws in this paper.  But even then I would not have been moved to respond to it, if they had not had the cheek to use the word 'never' in the title, and to employ such sloppy criteria in their hypothesis as 'bad economic times' and 'major macroeconomic declines,' which they tend to confute with stock market performance.

And that is not to say that any very broad sweep of data over time, without sufficient attention to the particular character and context of the various situations described within, can easily be misleading, or be used to 'prove' something else when using it to draw broad and poorly defined conclusions.

What kind of crisis was it?  Was it a crisis period or not?  What caused it, what policy actions helped to precipitate it, if any, and what were the policy responses?  How are you measuring the asset? Was the change uniform, or different across areas and economies, and what were those differences?

In the Weimar inflation, for example, gold among other assets was a spectacular hedge in a financial crisis, but so were some stocks.   So one can see that using the 'stock market' as your defining variable of a macroeconomic disaster might not be effective.  This is not a quibble.  It is calling out some very fuzzy thinking which characterizes this analysis, that does not support such a sweeping hypothesis.

It may surprise you, but not all crises are the same. And I do not hold gold to be a panacea, not at all. Nor do I consider it to be a outlier or aberration, which is the converse of this, that some others seem to do. 'Gold has never been a hedge against bad economic times.' The use of the word 'never' is a deep tell about their mindset and predisposition.

What variables do tend to have a correlation with gold over periods of crisis?  I have found in my own research that they tend to be risk spreads in bonds, the growth in the broadest money supply, other risk factors, and of course the relative strength of the currency in which you are expressing gold's value.   But even this is not uniform over time, especially in non-crisis or managed price periods, such as when gold is fixed as a 'standard.'

Most assets will smooth out over a long period of time, unless they are artificial constructs,like some stock indices, which are altered by throwing losers out and putting winners in to achieve a semblance of growth.

There is an ebb and flow in everything.

It takes someone with the time and ability and most importantly the open, inquisitive mind not bound by some school of thought or orthodoxy to go into the various situations where something has happened, and happened with a particular cause and effect that was widely acknowledged, in order to really understand the mechanisms and nature of a thing.

When I first began studying money as a practical consequence of my international business dealings, and later with first hand experience to the Russian currency crisis, I could have given two hoots about gold or silver.  They were never even mentioned in any of my business or economic courses.  But later as I continued to study this as an avocation, their role in the history of money and current events could not be ignored.

But never mind what is happening all around you.  Don't buy any gold, and don't like it. Laugh at the rest of the world which is buying it.  Tell them to eat trillion dollar platinum coins because you say so.  It doesn't matter. Keep believing, believe in memes and quaint canards and slogans like the 'efficient market theory' and 'printing money endlessly doesn't matter.' Keep applying top down monetary stimulus and ignoring the results of your serial policy errors and asset bubbles.

So called experts have their noses stuck so deeply into 'what everyone in their profession knows' as an accepted orthodoxy that they can understandably fail to see the forest for the trees. They miss the big changes, the 'sea-changes.'  They are well trained for a world that is changing all around them, using inflexible models too often based on deeply flawed assumptions.

In 2006, the central banks of the world became net buyers of gold bullion for the first time in 30 years, and are continuing to do so in a very big way. Gold has been moving en masse to the emerging economies of Asia, the biggest beneficiaries of 'globalisation.'

And there is a reason for this, that is not based in some quirk or personal idiosyncrasy.

But arguments based on faulty hypotheses such as this paper, or even worse, on almost nonsensical or ad hominem arguments, seem to poke their heads up every so often, either when the banks, or some other major players, get their panties in a bunch because of their exposure to bad bets in the metals markets, or when some central banks start to feel nervous about their ability to manage the markets in their currencies to achieve their financial engineering goals.

Those economic policy goals get in trouble, by the way, because the policy itself is quite possibly running against the markets, and is also misdirected in addition to being ineffective.  We have certainly had enough first hand experience in this for the the past twenty years or so.

But at the end of the day, people may say what they will, but money talks. The real economy has a message to tell for those who will listen to it.   Or not.

There will be those who will continue to say, 'this is not happening' even while a tsunami of change rolls over them.   That is their prerogative.

The time for warnings was then.  This is now.

And events are underway that will have something like the character of a force of nature.

GOLD HAS NEVER BEEN A GREAT HEDGE AGAINST BAD ECONOMIC TIMES: Evidence from decades of US and global data

Gold has not served very well as a hedge against bad macroeconomic and stock market outcomes. That is the central conclusion of research by Professors Robert Barro and Sanjay Misra, published in the August 2016 issue of the Economic Journal. Their study draws on evidence from long-term US data on gold returns, as well as gold returns during some of the worst macroeconomic disasters experienced across the world.

Gold has historically played a prominent role in transactions among financial institutions even in modern systems that rely on paper money. What’s more, many observers think that gold provides a hedge against major macroeconomic declines. But after assessing long-term US data on gold returns, the new research finds that gold has not served consistently as a hedge against large declines in real GDP or real stock prices.

From 1836 to 2011, gold delivered low average real price appreciation and experienced high average volatility. The mean real rate of price change was 1.1% per year, close to the 1% average real rate of return on three-month US Treasury Bills and comparable assets. The standard deviation of annual gold returns was 13.7%, almost as high as the 16.7% on the US stock market...

Royal Economic Society, Gold Has Never Been a Great Hedge Against Bad Economic Times

Gold Daily and Silver Weekly Charts - FOMC Next Week - Policy Error of the First Order - YTD Returns

Both the FOMC and the BoJ will be meeting next week, and the markets will be watching what they say and do with keen interest.

As you may recall, the Bank of Japan is now overtly monetizing the debt of Japan, having bought something like 90 percent of their bonds. What makes it monetization rather than money printing is the fact that the bonds are at least passing through a semblance of a public market on their way from the Treasury to the Central Bank. What makes it monetization is the size of the purchases and the non-market rates paid by the Bank.

In this sense, in addition to the BoJ, the Fed is also monetizing debt, as well as the ECB. They have been emboldened in that so far this has not produced any seriously disruptive consequences, although consequences there most certainly are.

The manner in which this is done and the proceeds distributed in a series of speculative asset bubbles that transfer wealth from the stimulus of aggregate demand to acquisitive rent-seeking makes it a policy error of the first order.

As for the FOMC meeting next week, they are faced with wishing to raise rates, for what I believe are their own policy purposes, in an economy that appears to be slipping into recession. That the Western financial Illuminati may wish to blame Europe and Asia for their economic troubles is another matter.

The US will be reporting much more economic news next week which may provide more clarity on the state of the economy.

Gold is having an unusually large month for delivery action on the Comex. And as for silver, although this is a quiet month, silver bullion continues leaking out of the warehouses. If you take a look at the numbers you can see why some think that JPM has almost cornered the market on free silver bullion at least in the NY markets.

Lets see if gold and silver can break out here. If so, then I think we can provide some reasonable estimates of the upsides.

Have a pleasant weekend.

Stock Share Risk Measure Rises To Highest Ever: What Time Is the Next Black Swan?

"Narcissus so himself, himself forsook,
And died to kiss his shadow in the brook."

William Shakespeare, Venus and Adonis

Tony Sanders has a very interesting column today pointing out a remarkable spike higher in 'skew risk' for the SP 500.

Here is the definition of skew risk from the the Chicago Board of Options Exchange:

The crash of October 1987 sensitized investors to the potential for stock market crashes and forever changed their view of S&P 500® returns. Investors now realize that S&P 500 tail risk - the risk of outlier returns two or more standard deviations below the mean - is significantly greater than under a lognormal distribution. The CBOE SKEW Index ("SKEW") is an index derived from the price of S&P 500 tail risk.

Similar to VIX®, the price of S&P 500 tail risk is calculated from the prices of S&P 500 out-of-the-money options. SKEW typically ranges from 100 to 150. A SKEW value of 100 means that the perceived distribution of S&P 500 log-returns is normal, and the probability of outlier returns is therefore negligible.

As SKEW rises above 100, the left tail of the S&P 500 distribution acquires more weight, and the probabilities of outlier returns become more significant. One can estimate these probabilities from the value of SKEW. Since an increase in perceived tail risk increases the relative demand for low strike puts, increases in SKEW also correspond to an overall steepening of the curve of implied volatilities, familiar to option traders as the "skew".

The original posting in complete is below.  I did want to take a moment to try and put this skew reading in a better context for the average reader.

As you can see from the chart below the spikes in skew are more of an 'early warning' indicator with several steps in the two prior instances of crashes, associated with the tech bubble in orange and the housing bubble in red.  I imagine history will find a similarly snappy name for our current bubble which is encompassed in light green.

I wish to stress that there is no simple linear relationship, ie a spike in skew is followed by a crash within six months, with any certainty.  In other words, seeing this spike in skew and then selling all your stocks and going short the market with triple leveraged ETFs is probably not a good idea and is not likely to be fruitful, timing and market decays being what they are.

The spike in skew is more of an indication of trouble, of a stress and fear in the system perceived by some of the more sophisticated in the market who presumably also have superior access to information.

I do believe that in the two prior cases here the continuing rally of SP 500 index after a spike in skew was at least partially a result of the 'Greenspan put' and the 'Bernanke put'.

That is, in reaction to fear and instability in the equity markets, the Fed modified its policy actions that had the effect of supporting the extension of what were at heart a mispricing of risk attributable to credit bubbles.   The Fed is not the only actor in this.  The regulators and the custodians of the public trust are very much involved in these sorts of macro mistakes.

What made this even more damaging was that, particularly in the latter case, these bubbles were wrapped around a core of extensive control frauds and intentionally mismanaged perceptions of risk, with quite a few enablers both on the Street and within the media and the regulatory bodies, either passively or actively.

I am not saying that all the motives of all the actors were malevolent.  But some were.

The notion that the market is infallible is rank romantic nonsense because it will always be within the domain of human action, and is therefore a product of human nature and subject to monopoly and manipulation without the conscious efforts of 'referees.'

N’en déplaise à ces fous nommés sages de Grèce,
En ce monde il n’est point de parfaite sagesse;
Tous les hommes sont fous, et malgré tous leurs soîns
Ne diffèrent entre eux que du plus ou du moins.

In spite of every sage whom Greece can show,
Unerring wisdom never dwelt below;
Folly in all of every age we see,
The only difference lies in the degree.

Nicolas Boileau-Despréaux, from Mackay's Madness of Crowds

And I fear that as so often in the past, though 'this may be madness, there may also be a method in it.'

I would take this spike in skew as more of an indicator of a probability. Notice that the skew spiked earlier in this latest phase, and then dropped as the market continued to rally higher.

There is nothing to say that this will not happen again.  Why?  Because there are a number of exogenous variables at play in any major market movement to say the least, as noted above in the policy actions of the Fed for example.  As Walter Bagehot observed, 'life is a school of probabilities.'

I can easily feature a plaintive response from the economists, 'well what are we supposed to do?'

Reform the market.  Get it back to a more stable and less fragile and conductive construction as we had in the 60 or so years following the reforms of the New Deal, which were overturned with the active involvement of so many economists, politicians, and Fed members in the 1990s.

But until that happens I am afraid we will see a series of bubbles and crashes, what I and others have called 'bubble-nomics.'

It is not the 'new normal.'  It is an aberration that seeks to sustain itself as the status quo.  It is a miscarriage of justice, as old as Babylon and as evil as sin.

It does seem to be a reasonable bet that the ruling classes, existing as they do in an echo chamber of their own illusions, will do nothing to change this without exterior motivation, or compulsion.

It will be an interesting race to see which market blows up first, the stock market or the precious metals markets.  Today Denver Dave asks if there is a scandal brewing in the paper gold and silver market.  I would say again, and as I am sure that Dave and others have said and would agree, that there is a high probability, based on some easily observed factual data, of a serious scandal, so much so that it is merely a question of when that particular pot boils over if nothing changes.

And it may be diverting to observe the increasingly obtuse actions that the plutocrats and their bureaucracy may take to 'save the system.'   Or perhaps, at long last, one small crash will serve as the catalyst for many in a grand bonfire of the vanities.  But if not, there will be more.

"Make no mistake about it, just as Lehman Brothers was set up to take the fall for triggering the 2008 collapse, China is being groomed as the new scapegoat for the coming crisis. But China’s economic slump is only a symptom, not the disease...

The reality is that the repeal of Glass-Steagall ushered in the greatest wealth transfer scheme in the history of America, allowing six mega banks in America to control the vast majority of insured deposits, use those taxpayer-backed deposits to gamble for the house, loot the bank from the inside by paying billions of dollars to select employees and customers and then hand the gambling tab to the taxpayer when the casino burns down. This model is a staggering headwind on both U.S. and global growth because it has created the greatest wealth and income inequality since the Great Depression.

Pam and Russ Martens, The Real Reason Global Stocks Are Flashing Red this Morning

So in sum, as I seem to have to say so often lately, 'timely caution is advised.'

Here is the original article from Confounded Interest.

SKEW (S&P 500 CRASH RISK) RISES TO HIGHEST LEVEL EVER!

The CBOE Skew index, a measure of tail risk for the S&P 500 index, just exploded.

It is now at the highest level on record.

It looks like an S&P 500 index downturn follows the SKEW breaching the 140 level.

This is not surprising given how much air has been pumped into asset markets like the S&P 500 index.

Why the Fed's Policy Actions Are Not Working

“Trickle-down theory - the less than elegant metaphor that if one feeds the horse enough oats, some will pass through to the road for the sparrows.”

John Kenneth Galbraith

As I said earlier today in a reaction to the FOMC announcement:

"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 and the very wealthy for their personal gambling and asset acquisitions activities 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."

The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be an sustainable recovery.

And keep the financial system on life support while the rest of the economy languishes, the poor suffer, and the middle class deteriorates is not coherent, except for a narrow band of beneficiaries.

Let us be reminded that the Fed is also a primary regulator of the financial system as well as an interest rate joystick operator.

And the mainstream media and the politicians wonder why the public is not doing what they expect.

This chart below is from Bloomberg News, The Richest Americans Are Winning the Economic Recovery.

"U.S. Census Bureau data out Wednesday underscore just how lousy the recovery has been if you aren't rich.
Looking at eight groups of household income selected by Census, only those whose incomes are already high to begin with have seen improvement since 2006, the last full year of expansion before the recession. Households at the 95th and 90th percentiles had larger earnings through 2014, the latest year for which data are available.

Income for all others was below 2006 levels, indicating they're still clawing their way out of the hole caused by the deepest recession in the post-World War II era."

And this result, after eight years of some of the biggest expansion of a central bank balance sheet in US history!

Stiglitz: Why Western Capitalism Has Been Failing Since 1980

As I had written some time ago in the The Fall of the American Republic: The Quiet Coup:

"I am not so optimistic that this reform is possible, because there has in fact been a soft coup d'etat in the US, which now exists in a state of crony corporatism that wields enormous influence over the media and within the government.

To be clear about this, the oligarchs are flush with victory, and feel that they are firmly in control, able to subvert and direct any popular movement to the support of their own ends and unslakable will to power.

This is the contempt in which they hold the majority of American people and the political process: the common people are easily led fools, and everyone else who is smart enough to know better has their price. And they would beggar every middle class voter in the US before they will voluntarily give up one dime of their ill gotten gains.

But my model says that the oligarchs will continue to press their advantages, being flushed with victory, until they provoke a strong reaction that frightens everyone, like a wake up call, and the tide then turns to genuine reform."

 

The article which I wrote was based on the insightful and largely ignored work by renowned economist Simon Johnson called The Quiet Coup.

 

This lecture by Stiglitz below is a little 'wonky' and uses some terminology which may be unfamiliar.

Nevertheless if you listen to it and just try to capture the main points of his discussion it will be worthwhile.

 

His basic premise is to ask why capitalism has shown a tendency to stagnation since 1980 in the United States and other parts of the West.

 

I am, as you know, an adherent to the belief that there has been a soft coup d'état in the US.  One can always quibble about the exact dates, but that is of less importance.   I have said it was shortly after Greenspan's 'irrational exuberance' speech, although the stage was certainly set for this during the 1980's with the rise of the efficient markets hypothesis, the assumption of rational wealth optimizers in the markets, and of course, the laughable supply side economics which are the old trickle down canard in drag.

 

The point, rather, is to understand what has happened, to continue to shine a light on it, and to hope that Simon Johnson is correct, that the overreach of the 'winners' will eventually provoke a reaction. 

 

Quite frankly I had thought it would have come by now.  One can rarely go wrong betting on the power of apathy and momentum, and the persistent greed of the sociopaths and their enablers.

 

After all, in the aftermath of a tragic derailment of the flagship train line in the US from Washington to Boston that could have been prevented by continuing investments in fundamental railroad infrastructure, the House of Republicans have voted to further slash Amtrak funding by $260 million. 

They are instructed to hate anything that benefits the public without putting an abundant stream of income into the pockets of their corporate money masters.  This explains their virulent animosity to Social Security, public transportation, public healthcare, public education, public infrastructure, consumer protections, environmental laws, safety regulations, product safety measures, and any sort of financial regulation that inhibits the greed and power of the Banks.

And we should be ashamed for continually standing quiet in the face of such pathological incivility.

 

But I can almost guarantee that if this crash had been the result of some sort of despicable act of terrorism for example, the public coffers would already be wide open, flowing with a Niagara of funds for homeland security and the militarization of domestic law enforcement.   Millions for the corporatized state, but little or nothing for the people.

 

I am increasingly concerned that, as has happened so many times in the past, the status quo will greet this eventual reaction for reform, justice, and equality with repression and even draconian measures to maintain what they perceive as their rightful place and power. 

 

Like apathy and momentum, it is also difficult to underestimate the self-delusion and overreach of sociopaths who would be as gods, even if they are gods of the damned.

History is replete with examples.

 

'Transitory Factors' Affect Economy, But the Effete Fed Remains an Intractable Ass

"If the law supposes that," said Mr. Bumble, squeezing his hat emphatically in both hands, "the law is an ass".

Charles Dickens

As suggested, the Fed said what was to be expected— of a collection of elitist asshats, pampered princes, and supercilious elitist boobs caught in the credibility trap of their serial failures.

 

Although the credibility trap prohibits their mentioning it overtly, their statement omits all references to the tightening that they have led everyone to expect.   So although they exude confidence in their remarks, they must have felt that creeping fear going up their spines, of the broken wall, the burning roof and tower that is characteristic of imperial overreach and folly.

 

The immediate response from financial television is that stocks are up while the euro is dropping and 'gold is plunging.'  Yeah about six dollars.  Apparently the prepared reaction was not carried out properly.  Well, there is always an opportunity to rig the market reaction tomorrow.  One must keep up appearances.

 

The Fed has been horribly wrong about nearly everything they have forecast and most of the policy actions they have taken as both a central bank and a regulator for the past twenty years.   The only group that has put forward a more disreputable and counterproductive performance has been the Congress, and the deeply captured professional class.

Press Release

Federal Reserve Press Release

Release Date: April 29, 2015

For immediate release

Information received since the Federal Open Market Committee met in March suggests that economic growth slowed during the winter months, in part reflecting transitory factors. The pace of job gains moderated, and the unemployment rate remained steady. A range of labor market indicators suggests that underutilization of labor resources was little changed. Growth in household spending declined; households' real incomes rose strongly, partly reflecting earlier declines in energy prices (ROFLMAO), and consumer sentiment remains high.

Business fixed investment softened, the recovery in the housing sector remained slow, and exports declined. 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 (not including food and healthcare and rent and the basics); 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. Although growth in output and employment slowed during the first quarter, the Committee continues to expect that, with appropriate policy accommodation, economic activity will expand at a moderate pace, (the Fed has not yet delivered the appropriate policy, sticking with a top down, bank-centric approach) 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 declines in energy and import prices dissipate.  (There goes the 'real income growth')  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.  (Keep doing what is helping to fuel inequality, and has not been working for about six years now)

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.

The Fed's Next Doofenshmirtz Moment - 'Quicksilver Markets'

THE MISSION

“The FOMC is firmly committed to fulfilling its statutory mandate from the Congress of promoting maximum employment, stable prices, and moderate long-term interest rates. The Committee seeks to explain its monetary policy decisions to the public as clearly as possible.

Such clarity facilitates well-informed decision making by households and businesses, reduces economic and financial uncertainty, increases the effectiveness of monetary policy, and enhances transparency and accountability, which are essential in a democratic society."

THE REALITY

 

I do not think that this blog entry really isn't being a naysayer, just negatively commenting on those facing a difficult task. 

Or even really unfair.

After all, the Fed has been blowing up the US economy, and taking the world to the brink of economic and political disaster, about every eight years since 2000.  And less regularly going back 1987 at least.

 

And they have been getting plenty of help from the government and the media.

They all put the banking system and the financial elite first, and the devil take the hindmost. 

 

When the powerful are single-mindedly determined to have their way, even if it is horribly wrong, it is difficult and often dangerous to be right, or to even admit to knowing the difference. 

Their policy errors will be a new chapter in the backward predicting textbooks of the dismal science.  And I would probably enjoy this if I were reading about it in the more distant future.

 

What were they thinking? 

And they appear to be about right on schedule for their next Doofenshmirtz Moment.

 

US Treasury Warns Stock Market Is Approaching 'Two Sigma Threshold' and Quicksilver Markets

 

They are not evil.  Or even dangerously incompetent and frightened.  They are equal measures servile, bureaucratic, arrogant, and banal.

 

And they and their courtiers are caught in a credibility trap.

 

The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustainable recovery.