The Hidden Messaging Behind FOMC Announcements

The FOMC announcements from Fed Chair Janet Yellen are like Jerry Seinfeld episodes. It's a show about nothing. Her long-winded transparencies could be summed up by, "we're not raising interest rates until further notice."

The underlying message should be "We want to hike rates, but we can't because the debt servicing costs would be out of control. But we can't tell you that because markets would collapse. So, QE to infinity, bitchez!"

Who Leaked The FOMC Statement To Gold Traders?

http://www.zerohedge.com/news/2013-09-18/who-leaked-fomc-statement-gold-traders

Incredibly Important Developments In Many Key Markets

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/5/23_Incredibly_Important_Developments_In_Many_Key_Markets.html

Meeting of the Federal Open Market Committee on June 29-30, 2005

The Fed knew the housing bubble was about to burst in 2005.  So why did Fed Chairman Bernanke tell the world everything was fine in 2005, 2006, 2007, and even 2008 when we had a financial meltdown?  It's 234 pages long, but if you care to skim it, you'll know the FOMC saw it coming, even if they failed to warn the public.

http://www.federalreserve.gov/monetarypolicy/files/FOMC20050630meeting.pdf

Fed Reserve Governor Bullard wants inflation

The Fed governor calls for more quantitative easing on a massive scale to combat deflation, and to induce inflation. I've expected this action all along, and it will occur soon at tomorrow's FOMC meeting, or next month's. Be careful what you wish for, James Bullard.



http://www.youtube.com/watch?v=cSV1U_pppBQ&feature=player_embedded

Further job losses may spur quantitative easing

This is what I have been predicting all along: another round of quantitative easing due to a non-existent economic recovery, despite incessant cheerleading by government economists to the contrary.

http://www.guardian.co.uk/business/2010/aug/06/us-jobs-fall-double-expected

The sharp drop in jobs, which follows news of slowing economic growth in the US, is likely to prompt discussions at the Federal Reserve over implementing more quantitative easing – a way of pumping money into the financial system. The central bank's Federal Open Market Committee (FOMC) meets on Tuesday and Fed chairman Ben Bernanke has already hinted to markets that its programme of asset purchases could be resumed.

"The big picture is unfortunately that the downtrend in US economic growth is once again obvious, and these figures will probably do little to deter the FOMC from ultimately implementing fresh stimulus in the near future," said Nick Beecroft at Saxo Bank.

"I'd expect them to reinstate a quantitative easing programme - buying either US Treasuries or mortgage-backed securities - either at next week's meeting, or more likely at the following meeting on 21 September."

Goldman Sachs is now in the same camp, predicting QE 2.0 will be announced in Tuesday's FOMC meeting. They also lowered their forecast for GDP growth for 2011 from 2.5% to 1.9%, and raised their estimate for the unemployment rate from 9.7% to 10%.

http://www.zerohedge.com/article/goldman-explains-imminent-launch-1-trillion-qe-2-muses-dreaded-double-d

FOMC press release

In the November 4, 2009 Federal Open Market Committee (FOMC) press release:

http://www.federalreserve.gov/newsevents/press/monetary/20091104a.htm

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period.

Furthermore,

Household spending appears to be expanding but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit.

My take: great, as the average worker is losing their job--or has their salary cut, and their home value is further eroding, and they can't get a loan, they're managing to spend more money.

Anything wrong with that picture?

Fed inflation projections

According to Bloomberg:

Federal Reserve Bank of Philadelphia President Charles Plosser said on May 21 inflation may rise to 2.5 percent in 2011. That exceeds the central bank officials’ long-run preferred range of 1.7 percent to 2 percent and contrasts with the concerns of some officials and economists that the economic slump may provoke a broad decline in prices.

The U.S.’s main interest rate may need to stay near zero for several years given the recession’s depth and forecasts that unemployment will reach 9 percent or higher, Glenn Rudebusch, associate director of research at the Federal Reserve Bank of San Francisco, said yesterday.

Members of the rate-setting Federal Open Market Committee have held the federal funds rate, the overnight lending rate between banks, in a range of zero to 0.25 percent since December to revive lending and end the worst recession in 50 years.

My translation: don't listen to government statisticians and economists. Expect massive inflation down the road, not deflation. The technical reason: economists are retrospective, relying too much on lagging indicators, instead of forward-looking data. The "real" reason: it's in the government's best interests to under report inflation data. Pension fund and social security payments with cost-of-living adjustments are linked to the consumer price index (CPI) data. Also, a soaring cpi is unnerving to markets and consumers, driving up interest rates, especially at the long end of the curve (longer expiration bonds). This caps economic growth as the cost of borrowing increases.

As consumers, we know the real story when components of our budget are rising on a regular basis. So what should we do in the face of diminished purchasing power? Precious metals and other commodities, including energy and grains are good hedges against inflation. Aside from the physical commodities, mining companies and commodity exchange traded funds (ETF) are other potential plays. For bond investors, there are Treasury Inflation Protection securities (TIPS), and the TIP ETF.

Disclaimer: Due your own due diligence and consult with your financial advisor. These are not specific recommendations.

Even former Fed Governor is calling out the Fed

Former Governor of the Federal Reserve Bank of St. Louis William Poole as soon on Bloomberg TV:

"The Fed has been encouraging the bond market to think the Fed is going to be in there supporting Treasury Bond yields. That can't be because the implications of that commitment are too simply horrendous to think about."


http://www.bloomberg.com/avp/avp.htm?clipSRC=mms://media2.bloomberg.com/cache/vhuS.o9XrC7E.asf

He's basically blasting his former colleagues for lack of transparency on their unprecedented balance sheet blow out. He also criticizes them on mistakenly (or deceptively) trying to artificially suppress interest rates, thus hoodwinking bond buyers into stepping up and continuing to purchase US Treasuries. There's been a dearth of buyers since last September--no buyers equals higher interest rates to attract said buyers. Hence, bond prices will reverse and melt down, much like the mortgage-backed securities market.

The US government is now the debtor of last resort, and when investors stop drinking at the trough, there will be nobody to sell our massive trillion-dollar debt to. When interest rates spike to attract reticent demand, the interest on said debt will choke our country for decades, if not generations.

Poole's colleague in the dual interview, a former member of the (Federal Open Market Committee (FOMC), even goes so far as to say the recent actions by the Fed are unconstitutional.