Federal Reserve Statement: Chili Today, Hot Tamale

The Fed continues to 'taper' their purchase of Treasury and Agency debt, but are rolling over all existing securities, which means no reduction in their Balance Sheet, just a slower rate of increase attributable to debt instrument purchases through this program.

The Fed has softened its economic forecast for 2014 'because of the weather,' and reaffirms its stronger view that 2015 will see something more like a recovery that will permit a relaxation of their accommodative policy. 

Don't worry we know what we are doing and this is going to work if you give it (more) time, and then it will all be great.  Just give us more time, and more time, and more time, and eventually it will all work out.   Until then, its chili today, but hot tamale. 

I think that they either do not know what they are doing, or feel too constrained by exogenous factors  to actually do what must be done to fix this system.  They are, after all, a private entity owned by the Banks, the same Banks that crashed the system in the first place.  The Fed is very much in the credibility trap.

I suspect that the recovery will be in the ever retreating future, if reforms to the financial system are not made, and if government fiscal and political policy does not begin to encourage growth in the median wage. 

This is what it will take to support growth in aggregate demand without distorting consumer balance sheets with unpayable and unsustainable debt once again.  But for now they will keep giving money away to the Banks, and hope some of it makes its way to the real economy.

Chair Yellen will be addressing issues and questions in her press conference. 

Bloomberg has been showing a fairly nice graphic of the Fed's latest 2014 and 2015 economic projections.  I will look for a copy of it and include it later when I find it.

I am not hopeful for this change at this time.  Or any time in the future until something fundamental changes that will allow for meaningful reform.

Board of Governors Federal Reserve System
Policy Statement
Release Date: March 19, 2014
For immediate release

Information received since the Federal Open Market Committee met in January indicates that growth in economic activity slowed during the winter months, in part reflecting adverse weather conditions. Labor market indicators were mixed but on balance showed further improvement. The unemployment rate, however, remains elevated. Household spending and business fixed investment continued to advance, while the recovery in the housing sector remained slow. 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 labor market conditions will continue to improve gradually, moving toward those the Committee judges consistent with its dual mandate. The Committee sees the risks to the outlook for the economy and the labor market as 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.

The Committee currently judges that there is sufficient underlying strength in the broader economy to support ongoing improvement in labor market conditions. In light of the cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions since the inception of the current asset purchase program, the Committee decided to make a further measured reduction in the pace of its asset purchases. Beginning in April, the Committee will add to its holdings of agency mortgage-backed securities at a pace of $25 billion per month rather than $30 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $30 billion per month rather than $35 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 remains appropriate. In determining how long to maintain the current 0 to 1/4 percent target range for the federal funds rate, 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 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 for a considerable time after the asset purchase program ends, especially if projected inflation continues to run below the Committee's 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored.

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.

With the unemployment rate nearing 6-1/2 percent, the Committee has updated its forward guidance. The change in the Committee's guidance does not indicate any change in the Committee's policy intentions as set forth in its recent statements.

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

Voting against the action was Narayana Kocherlakota, who supported the sixth paragraph, but believed the fifth paragraph weakens the credibility of the Committee's commitment to return inflation to the 2 percent target from below and fosters policy uncertainty that hinders economic activity

Gold Bull Market Corrections Then and Now

The rumours of the death of the precious metals bull market might just be a bit premature.

I think we are in the midst of a generational change in the international currency system. 

The currency platform will continue to shift, and attempt to restabilize.  Change is in the wind, and has been for some time, and flexibility with the ability to learn and adjust will continue to pay a premium.

And it is hardly over and done yet.  I think we are only at the end of Act I, the realization that the dollar reserve currency system put in place unilaterally by Richard Nixon is unsustainable.  But no one knows yet exactly what comes next.

As for the chart of the big correction in the 70's, it may not repeat.  But a rhyme would be fine. 

This chart is from goldchartsrus.com.

Gold Daily and Silver Weekly Charts - FOMC Meeting Day One

Today was the first day of the FOMC meeting. Tomorrow they will announce their latest reading of the entrails of the real economy at 2 PM EDT.

It was 'risk on' all the way, as money moved into equities. And Treasuries as the yield fell. Surprisingly those two moved in concert, but on thin volumes. Pretty as a picture. Endless prosperity and no worries.

Gold has now come back down to test the neckline.  Let's see how we end the week.

There will be a Comex option expiration next Tuesday for the more important April contract.  We are getting closer to a real delivery month, at least in terms of the Comex which delivers relatively little.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Rallying Up to Resistance on Thin Volumes

Today was the first day of the FOMC meeting.

Stocks rallied higher on rather thin volumes. I wonder if they will make it to the top of the trending channel.

VIX is back to fairly complacent levels despite the international turmoil. All is well in the Pax Americana.

Another Banker took his own life.  He had some connections to the London Whale trade. 

Have a pleasant evening.

Grant Williams: Crimea River

"'Public clashes between Ukrainians and Russians in the main square in Sevastopol. Ukrainians protesting at Russian interference; Crimean Russians demanding the return of Sevastopol to Russia, and that parliament recognise Russian as the state language. Ukrainian deputies barred from the government building; a Russian "information centre" opening in Sevastopol. Calls from the Ukrainian ministry of defence for an end to the agreement dividing the Black Sea fleet between the Russian and Ukrainian navies. The move is labelled a political provocation by Russian deputies.

The presidium of the Crimean parliament announces a referendum on Crimean independence, and the Russian deputy says that Russia is ready to supervise it. A leader of the Russian Society of Crimea threatens armed mutiny and the establishment of a Russian administration in Sevastopol. A Russian navy chief accuses Ukraine of converting some of his Black Sea fleet, and conducting armed assault on his personnel. He threatens to place the fleet on alert. The conflict escalates into terrorism, arson attacks
and murder.'

Sound familiar? All this happened in 1993, and it has been happening, in some form or other, since at least the 14th century.

Instead of blustering into their microphones in a frenzy of self-righteous indignation, the leaders of the US and EU would do well to spend a few minutes swotting up on the history of this volatile region. They would learn that Crimea has a long history of conflict between its Ukrainian, Russian and Tartar communities, and has been ping-ponging back and forth between Ottoman, Russian and Ukrainian jurisdiction for years..."

So begins an article in the UK Guardian this week, written by a British novelist of Ukrainian origin, Marina Lewycka Ukraine and the west: hot air and hypocrisy; and amidst all the furore surrounding the events in Ukraine these past couple of weeks, it's important to gain a little perspective in order to understand the history surrounding the country's fractious relationship with Russia and its recent dalliance with European suitors.

The key to the stand-off over Ukraine is the Crimean Peninsula — no stranger to conflict over the years and home to the infamous "Valley of Death" into which rode the 600 whom Tennyson commemorated in his epic poem recounting the ill-fated Charge of the Light Brigade. The order that sent those gallant young men to their inevitable doom is symptomatic of the kinds of catastrophic misjudgements that get made when emotions are running high...

Read the entire piece, with its wonderful title, by Grant Williams in downloadable pdf format here.

I am certainly no expert on the politics of the Ukraine, past or present. I remember the Orange Revolution, and that there is significant corruption in those regions of the world is nothing new. We have admirable amounts of it here as well, as we tend to forget. And it is mildly galling that there are never any consequences for financial miscreants and neo-cons, who lie us into financial crises, and wars under the false pretexts of patriotic fervor. 

The humanitarian cloak of freedom is a popular colour when worn for adventures abroad, but it seems often to be sorely lacking at home these days.  And the hardest voices for humanitarian wars are often the hardest voices on their own, especially the weak, the infirm, the elderly.  And those hard voices, those tough guys, are rarely in the fight themselves.

But one thing I am sure of is that Orwell, and General Smedley Butler for that matter, had it right.

"War against a foreign country only happens when the moneyed classes think they are going to profit from it."

George Orwell

With a few exceptions of a more defensive nature perhaps,  I think that this is about right. And I would hope we are all aware that the 'defense' excuse is often the contrived refuge of some very worldly men and their private interests involving money and power.

Does that sound skeptical, even cynical? Well then, perhaps I am becoming so with experience.

Have a pleasant evening.

Related:

Ukraine: Who Is Playing For What - GolemXIV

Remember These Words

As you examine your own self, and your conscience, remember these words.

As you face your trials now and in the future, remember these words.

When you hear conflicting versions of the truth, remember the hallmark of these words.

When your faith is strained,  and hope seems pointless, and your love begins to grow cold, and fear eats at the marrow of your bones,  remember these words.

Not many may remain standing, but those that do, will remain standing only with love.  If you do not hold closely to love, above all else, then you may have already fallen.  And if there is time, you might be able to stand again, and gather yourself together, and continue to go forward.  Even Peter himself fell three times, but in his sorrow and humility rose again.

If I speak in the tongues of men or of angels, but do not have love, I am only a resounding gong or a clanging cymbal. If I have the gift of prophecy and can fathom all mysteries and all knowledge, and if I have a faith that can move mountains, but do not have love, I am nothing. If I give all I possess to the poor and give over my body to hardship that I may boast, but do not have love, I gain nothing.

Love is patient, love is kind. It does not envy, it does not boast, it is not proud. It does not dishonour others, it is not self-seeking, it is not easily angered, it keeps no record of wrongs. Love does not delight in evil but rejoices with the truth. It always protects, always trusts, always hopes, always perseveres.

Love never fails. But where there are prophecies, they will cease; where there are tongues, they will be stilled; where there is knowledge, it will pass away.

For we know incompletely and we prophesy incompletely, but when our fullness with God comes, what is incomplete and imperfect disappears. When I was a child, I talked like a child, I thought like a child, I reasoned like a child. When I became a man, I put the ways of childhood behind me.

For now we see life as only a reflection, darkly, as if in a mirror; then we shall see true life face to face. Now I know incompletely; then I shall know fully, even as I will be fully known.

But for now these three virtues abide: faith, hope and love. And the greatest of these is love.

1 Corinthians 13:1-27