Category Archives: Central Banks

Janet Yellen Responds as a Central Banker Would

By Biiwii

Janet Yellen goes on the defensive…

Let’s try to untangle the web of Fed-speak going on here.  “Reality” for our purposes is defined as my opinion, obviously.

Yellen Defends Seven Years of Low Interest Rates in Letter to Nader


Warning that “an overly aggressive increase in rates would at most benefit savers only temporarily,” she argued in the letter released Monday in Washington that the Fed’s seven-year era of zero rates had sheltered American savers from dramatic declines in the value of their homes and retirement accounts.


It was a thing called deflation, which is a natural corrective to man-made, currency-compromising monetary policy that leverages the ‘value’ inherent in official ‘money’ in service to asset appreciation.  Periodically, this ‘money’ becomes valued as liquidity as the monetized economy deleverages from the official Fed-sponsored inflation (in this case, Alan Greenspan’s commercial credit bubble).  In other words, the “value of their homes” was a false economic signal to begin with.  So what she is saying is that the Fed’s seven-year era of zero rates have been a tool employed to forestall, you guessed it… reality.


“Many of these savers undoubtedly would have lost their jobs or pensions (or faced increased burdens from supporting unemployed children and grandchildren),” if the Fed had not acted with such force, she wrote.


Yes indeed, they would have.  That would have been due to the fallout from from the last time the Fed acted to delay an economic deleveraging.  So what you are saying Ms. Yellen, is that you have employed a different flavor (government vs. commercial credit) of the same solution that was in actuality, the cause of the problem to begin with.  See?  The consumer is now hopped up on government credit instead of mortgage products on this cycle.  From FloatingPath

government credit to the consumer, answer to janet yellen


Repeating that she and most of her colleagues expect the pace of policy tightening to be gradual after liftoff, Yellen said “overly aggressive” rate hikes could also undercut the economic expansion and force the Fed to reverse course back to zero, drawing a parallel with Japan, where rates have been stuck near zero for the past 25 years.


It’s a Kabuki Dance.

janet yellen does a kabuki dance


Yellen’s letter responded to a plea from a “group of humble savers” that included consumer advocate Ralph Nader frustrated by low returns gained from traditional bank deposits and money-market accounts.

“We want to know why the Federal Reserve, funded and heavily run by the banks, is keeping interest rates so low that we receive virtually no income for our hard-earned savings while the Fed lets the big banks borrow money for virtually no interest,” it read. “It doesn’t seem fair to put the burden of your Federal Reserve’s monetary policies on the backs of those Americans who are the least positioned to demand fair play.”

Yellen told the group that lower borrowing costs helped make large purchases more affordable for American consumers, supporting the economy and creating “millions of jobs.”


I didn’t know Ralph Nader was still around.  I remember him from when I was a kid, and I am pretty old.  To answer your question Ralph, the Fed has been keeping rates so low in order to make sure that enough of the economy deleverages from previous Fed-induced moral hazards.  The Fed has held savers in suspended animation in an effort to make powerful and abusive interests whole again.  It is these interests that matter to the Fed, not regular people.

As to the last paragraph, the average American consumer cannot make large purchases without ample credit (see graph above).  Households are no doubt better off today than they were in 2009 but again, we are talking about the cure being the disease.  Yellen is justifying a new flavor of the policy that created the “Great Recession” as the media came to call it.  It was not a great recession, it was a deflationary episode that unwound the Greenspan Fed’s excesses, and then deflation was kicked down road by the Bernanke/Yellen Feds as if it were just an empty can of Budweiser.

FOMC, Speed Readers on Your Mark

By Biiwii

Bold mine

Release Date: October 28, 2015

For immediate release

Information received since the Federal Open Market Committee met in September suggests that economic activity has been expanding at a moderate pace. Household spending and business fixed investment have been increasing at solid rates in recent months, and the housing sector has improved further; however, net exports have been soft [take a bow, Uncle Buck]. The pace of job gains slowed and the unemployment rate held steady. Nonetheless, labor market indicators, on balance, show that underutilization of labor resources has diminished since early this year. Inflation has continued to run below the Committee’s longer-run objective, partly reflecting declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation moved slightly lower; 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. The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, 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 but is monitoring global economic and financial developments. 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. 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 whether it will be appropriate to raise the target range at its next meeting, 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 some 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.

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.

In other words…

The committee has no effing idea what is out ahead so we do nothing (and hope the hell Uncle Buck calms down).

Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Stanley Fischer; Dennis P. Lockhart; Jerome H. Powell; Daniel K. Tarullo; and John C. Williams. Voting against the action was Jeffrey M. Lacker, who preferred to raise the target range for the federal funds rate by 25 basis points at this meeting.

Post-Draghi Implications

By Biiwii

So now the dust settles on global markets that were given quite a stir yesterday by the ECB’s proclamation “We are ready to act if needed.  We are open to a whole menu of monetary policy instruments.”

These things come on a nice, neat menu now?  As if they are codified, tried and true and simply ready for implementation?

Well, if the US – where they showed ’em how it’s done – is a good example then yes, it is as simple as that.  I used to write about Ben Bernanke’s big brain as he took policy innovation (interference?) to previously unheard of levels.  It was ‘Check out the big brain on Brad Ben’…

big brain on brad, after the ecb qe statement

What it actually is is a global deflationary whirlpool sucking things toward the drain.  But the valiant fight is kept up by our policy heroes in a sometimes competitive, sometimes alternating fashion. Right now they are alternating.

Continue reading Post-Draghi Implications

Bernanke on Warren-Vitter & Last Resorts

By Biiwii

Ref. Warren-Vitter and the lender of last resort

[edit] I have had some complaints about writing that I “like” Bernanke and Obama.  That is telling of how divisive today’s financial and political climates are.  I did not write ‘I like the jobs they have done’, after all.  I have not “liked” the job a Fed chief or President have done since I can remember.  It was wording in a post simply implying that I think they are probably nice men.  Sheesh… it would help if some people would actually make the effort to pick up on nuance.  It’s a post answering the assertions of a former Fed chief destined to see the annals of history one day revoke his “Hero” status.

I have always liked Ben Bernanke, in that I think he is a soft-spoken, nice guy who took the hand off from Alan Greenspan in stride, heroically making chicken soup out of the chicken excrement he was left with.  He kept his dignity and calm demeanor during the days when inflationist gold bugs codified the term “Helicopter Ben” and turned it into just another accepted way of saying “Ben Bernanke”.

Mr. Bernanke met the impossible challenges left him by the Greenspan Fed and the Bush White House, and being a scholar of the Great Depression and an intellectual Keynesian, did what he was always meant to do.  He employed tried and true Central Bank policy-making against a natural bust (i.e. reaction to Greenspan’s policy-induced 2003-2007 inflationary boom) of the system.

Continue reading Bernanke on Warren-Vitter & Last Resorts

Raghuram Rajan Speaks

By Biiwii

Of all the world’s Central Bankers, one stands out as a teller of truth and an adherer to sensible long-term policy.  Yes, my personal hero (insofar as one has heroes in the financial realm), Raghuram Rajan.  Thanks to Joe for the link…

India’s central bank chief accuses G-7 of currency manipulation

I mean sure, we all see and to varying degrees understand the bald faced currency manipulation (and other policy machinations) going on out there.  But it is important when a Central Banker cries out in the wilderness.  Even if said Central Banker is not overseeing the finances of a fully developed nation (yet).  It doesn’t sound like the IMF is listening.  That would be the International Muppet Fund.

Speed Readers

Speed readers everywhere see “does not mean that that the Committee has decided on the timing…”

And they’re off to the races!

For immediate release

[edit] Okay, so they dropped the word “patient” that everybody was hyperventilating about.  What did they replace it with?  That gobbledeegook above.  It really is unbelievable how so many take this so seriously.  Folks, we are in Wonderland…

T-Minus 1hr, 40 min. to the Great Drama

By Biiwii

Of course, at 2:01 US Eastern time the market could get very actionable, but for right now it is a ‘close to the vest’ market.  This means no big bets and no strong leans in one direction or the other.

Everyone Hates US Stocks  –Bloomberg

If that’s true, that ain’t bearish.

Hedge Funder Dalio Thinks the Fed Can Repeat 1937 All Over Again  –Bloomberg

I researched this gentleman and I love what he is all about, philosophically and in the way he views life as it relates to his vocation in the markets.  i.e. it’s not just some MSM b/s.  He is to be taken seriously IMO, in his knowledge of the markets but even more, as a respectable human (something lacking in this sphere, again IMO).

So here is the Fed’s idiotic Dot Plot that we are all supposed to be transfixed by.


The stock market took a hit, bounced and now by my eye anyway, is not at all cut and dry.  Sentiment became toxic to the over bullish side a couple of weeks ago.  Then the market dropped and bounced.  This should not be an end to the downturn given the former sentiment profile that has not been nearly fixed yet.

But the leadership items we follow (esp. Biotech, Small Caps and Banks) are stable to good and then there are the AAII Individual Investors having been spooked, which is short-term positive (though the longer-term trend is over bullish and so, not healthy).


There’s lots more to the picture that can’t make it into a simple post.  But it is best to check assumptions at the door and let’s all just be prepared for what is on the other side.  It’s not so much the FOMC I am concerned about as my fellow market participants.  That’s why I have remained in a comfortable position and recommended the same in NFTRH.  It’s the ‘no strong leans’ market at the moment.


In other words, we may raise interest rates or we may not.  Ha ha ha…

[edit] subtext:  screw the savers, let’s pretend that the hype is true and the great November ‘Jobs’ report is going to fan out and start enriching Main Street now that the top 1% are not only bailed out, but enriched beyond their wildest dreams.  Let’s pretend it has nothing to do with the fact that we already know we cannot raise interest rates without some… how shall we put it… significant side effects.

Release Date: December 17, 2014

For immediate release

Information received since the Federal Open Market Committee met in October suggests that economic activity is expanding at a moderate pace. Labor market conditions improved further, with solid job gains and a lower unemployment rate. On balance, a range of labor market indicators suggests that underutilization of labor resources continues to diminish. Household spending is rising moderately and business fixed investment is advancing, while the recovery in the housing sector remains slow. Inflation has continued to run below the Committee’s longer-run objective, partly reflecting declines in energy prices. Market-based measures of inflation compensation have declined somewhat further; survey-based measures of longer-term inflation expectations have remained stable.

Continue reading FOMC

Biggest Heist in History

Guest Post by Bill Bonner

The Biggest Financial Heist in History

Source: Wikipedia

If Mr. Market is afraid, he is putting on a brave face. The Fed’s QE ended on Wednesday. On Thursday, the Dow rose 221 points.

This is good news for Janet Yellen. She must think she has made a clean getaway. She has fled the scene of the biggest financial heist in history with no cops in sight. They’re not even aware a crime has been committed!

This grand larceny involved $3.6 trillion. Counterfeit – every dollar of it. Not a penny of it was ever honestly earned or earnestly saved… or dug out of the dirt and turned into coins.

No… We’re talking about the crime of the century… committed in broad daylight… with millions of witnesses. But hardly a single soul understood what was going on.

We begin by asking: How many TVs, luxury apartments, spaghetti dinners and parking places are there?

Continue reading Biggest Heist in History