Fed : Please Tell Us The Whole Truth and Nothing But The Truth.
The unemployment rate has been the Fed’s pet peeve for QE3 so much that they are willing to keep buying up to USD 85 billion a month in US treasuries and agencies to target an unemployment rate of 6.5% with recent whispers that the target may be lowered.
For the layman, it is hard to visualise a link between buying bonds and creating jobs when all we can see are higher stock markets and richer billionaires. http://www.marketwatch.com/story/10-things-billionaires-wont-tell-you-2013-11-15?link=sfmw
Why is the Fed so convinced they are right ? Especially when they are trying an experimental monetary policy regime that Japan and Europe appear to have caught on ?
Why do they defy the growing host of critics, most of which are prominent names in the markets ?
We are all taught the first lesson, some time in each of our lives, that there is no free lunch. So what is the catch in this economics lesson ?
Bernanke and now Yellen is telling the world that they will go on with the 85 billion dollar monetisation each month and that it will create jobs and raise inflation. Yet so far, they have not told the world the risks or the pitfalls or their policy.
Surely, they have a duty of care to the audience whom they are beholden to, for the Federal Reserve’s duty is to the American public, to tell the whole truth and nothing but the truth, so help them God ?
I oft get blind sided when I am overwhelmed, and charge on bullheadedly because I cannot cope with multi faceted problems that come along with just too much data for a single human being to understand. Thus we draw the boundaries for information processing and ignore the rest that falls outside the scope.
It is easy for the Fed to draw boundaries based on just the motive for their existence.
1. Maximum employment,
2. Stable prices, and
3. Moderate long-term interest rates
“Its duties have expanded over the years, and today, according to official Federal Reserve documentation, include conducting the nation’s monetary policy, supervising and regulating banking institutions, maintaining the stability of the financial system and providing financial services to depository institutions, the U.S. government, and foreign official institutions. The Fed also conducts research into the economy and releases numerous publications, such as the Beige Book.” http://en.wikipedia.org/wiki/Federal_Reserve_System
Nothing in those duties demand that the Fed has to responsible for widening income gaps and quality of jobs created or even asset bubbles in the stock market.
And if they fail in their objective, the escape route is simple – to throw their hands up and give up and join a private equity firm like former US Treasury Secretary Timothy Geithner is cleverly doing. http://www.reuters.com/article/2013/11/16/us-usa-fed-geithner-idUSBRE9AF02A20131116?feedType=RSS&feedName=businessNews
Greenspan has come out to say he was wrong many a time during his 10 year tenure as Fed chair. All too easy years after the events. http://online.wsj.com/news/articles/SB10001424052702304410204579139900796324772
The Fed has reached a god like status in markets these days with a single statement swaying sentiments and moving markets in magnitudes never seen before.
Isn’t it about time they laid out the cards and not just the positives of their actions ? And let at least the American public and the world know where the risks of their actions lie as well ?
You must be joking (I hope). The truth beyond the obvious will bring about the next rendition of the global financial system and / or a gold price of US$150,000 / ounce.
http://equitablegrowth.org/2013/11/16/759/this-mornings-must-watch-larry-summers-on-the-danger-of-a-japan-like-generation-of-secular-stagnation-here-in-the-north-atlantic#.Uoms6QeYe84.facebook
How can gold price go up ?
Revaluation of gold as a monetary metal to cover the spread between total assets and total liabilities.
That is the huge wedge in mindset that is driving the number of vaults set up in Asia each month.
And the West is enjoying success in tearing down the monetary metal idea. Is gold the true hedge for ordinary inflation or asset inflation ? Who governs gold and who polices gold ? And there is not enough of it ! Only 6 trillion worth of gold even if we count the scraps that are lost vs 17 trillion of US govt debt.
It is easier to bring the price of gold down to bring the cost of the debt down (or the price of the bonds up) ?
Gold is more than an inflation hedge – imagine it as a stem cell. It can be whatever you want it to be (monetarily). A key reason of its usefulness is because it is so useless.
You have to price in total debt – not just US government debt. This means off balance sheet liabilities, unfunded liabilities, derivatives exposure, et cetera. This is why you have Jim Sinclair calling for 50k gold, FOFOA calling for the same amount, Goldman Sachs increasing their exposure to gold significantly as they issue a sell call on gold, et cetera.
Because it is useless, use the shiny yellow metal to cover total liabilities. This will free up the gum currently pushing global growth even lower.
Yes. I agree wholeheartedly.
Trouble with a useless asset is that it all depends on how much people will believe in it and the media and politicians have been doing their best to talk it down so much so that new generations see bitcoins as a better store of value.
It pains me.