There’s much anticipation over this Wednesday’s FOMC decision.  As we all know by now, this is supposed to be the big unveiling of the Fed’s much anticipated third round of QE – now being dubbed “operation twist part deux”.   In a piece this morning, the Fed’s megaphone to the world, Jon Hilsenrath, discussed some of the likely actions:

“One issue high on the agenda: Detail what changes in unemployment and inflation it would take to make the central bank veer from its low interest-rate policy, according to people familiar with the matter.

…Fed officials are likely to consider other steps they might take to boost the ailing economy in the short-run when they meet Tuesday and Wednesday, including altering the composition of the Fed’s portfolio of securities so that it holds more long-term debt. The idea would be to push down long-term interest rates to stimulate more investment and spending. They also could try to encourage lending by cutting the 0.25% interest rate currently paid to private banks when they park money at the central bank.”

It sounds like Ben Bernanke is picking up President Obama’s strategy of speaking loudly and carrying a small stick.  The Fed can talk about the economy all they want.  They can set specific dates for specific policies, etc, but these are marginal policy changes that really have little to no impact on the real economy.  This is truly a sign that the Fed is desperate.  It’s like the husband who cheats on his wife repeatedly and pleads endlessly that she take him back.  Actions speak louder than words is an appropriate ending to that story in most cases.  The same can be said here.  And that’s been one of my primary gripes with monetary policy in recent years.  There has been no real transmission mechanism through which it works.  I was one of a handful of people who explained in great detail why QE2 would fail to revive the economy, but we continue to see faith and mythology surrounding the Fed’s new campaign efforts.  I won’t rehash these arguments today.  The bottom line is, these languages are refreshing in that it’s nice to see the Fed trying to be more transparent, but they’re not going to push a $15T economy in any sustained direction for more than a few minutes on Wednesday as the Wall Street trading desks go berserk over some minor statement change….

The second option Hilsenrath mentions is operation twist.  This involves pushing the long end of the curve lower in an attempt to flatten the curve and induce some borrowing/lending.  I’ve covered this thoroughly in the past.  It flat out won’t work unless the Fed is very specific in its execution.  They must target a specific long rate and be a willing buyer at that rate in any size.  I don’t think they’re willing to go that far as it would be seen as explicit money printing and debt monetization (more myths that we constantly read about these days – admittedly though, mythology was one of my favorite subjects in grade school – I’ve since grown out of that though).

There’s a substantial risk associated with this approach in that it could cause a seismic shift in the portfolio reblancing effect whereby investors are forced into hard assets and other higher risk assets which create market imbalances and potentially induce more of the cost push inflation we saw during QE2.  Besides, with long rates already at 2% on the 10 year bond, the Fed has to be wondering whether rates are really the problem (of course they’re not, aggregate debt is the problem, but let’s not include rational discussion in a conversation about Fed policy!).

In addition, recent CPI data has pushed the upper bounds of the Fed’s target rate of 2%.  That means they have to be increasingly concerned about stagflation.  Bernanke has been rather clear that he would only implement more QE if the deflation risks rose.  Last week’s core CPI of 2% has him thinking long and hard about more QE.  The bottom line is, even if they implement this program it’s unlikely to do much if anything.  And it has the potential to do more harm than good.  It will all depend on the implementation though.  If you hear explicit rates on long bonds, you might as well pile into every inflation trade you can find and wait for it to induce a further margin squeeze on the economy that essentially torpedoes our own ship.

Cutting the rate on excess reserves is another weak policy response.  Some advocates of this policy claim that the Fed can punish the banks by charging them to hold reserves.  This will supposedly force banks to use these reserves to lend and lead to economic expansion.  The Fed knows this is nonsense as banks are never reserve constrained.  So paying negative rates makes no sense.  The Fed could cut the rate on reserves to zero, but that serves little to no purpose as the effective Fed Funds Rate is currently 0.09% – already at the lower end of their current target range of 0-0.25%.   And as the NY Fed previously explained, there’s a simple logic behind paying interest on reserves – it serves as a de facto Fed Funds Rate in the current environment where the Fed’s balance sheet has expanded:

“Recently the Desk has encountered difficulty achieving the operating target for the federal funds rate set by the FOMC, because the expansion of the Federal Reserve’s various liquidity facilities has caused a large increase in excess balances. The expansion of excess reserves in turn has placed extraordinary downward pressure on the overnight federal funds rate. Paying interest on excess reserves will better enable the Desk to achieve the target for the federal funds rate, even if further use of Federal Reserve liquidity facilities, such as the recently announced increases in the amounts being offered through the Term Auction Facility, results in higher levels of excess balances.”

In addition, there could be negative effects here.  Izabella Kaminska at the FT has done some excellent work on the possible downsides of a cut in IOER (see here).  I highly recommend having a read.  It’s a bit dense, but it touches on some of the difficulties that could present themselves if the Fed is not explicit in its attempts to monitor the payments system.  She further notes that the current siren call for cutting the rate on reserves appears to be the last ditch efforts of the monetarist regime who has seen their precious theory essentially smashed to bits and pieces in the last three years:

“Finally, we think the driving force behind the call for lower IOER comes from monetarists who are frustrated that the reserve multiplier theory has been blown out of the water in recent years.”

In sum, it looks like the Fed is increasingly becoming the truly naked emperor.  As Warren Mosler likes to say, they’re like the child in the backseat of a car with the toy steering wheel.  Except this baby is crying all the way to the market and making a big fuss over nothing.  Unfortunately, everyone else in the car is being forced to listen to this endless bantering as we drive full speed into a wall.   Welcome to monetary policy in the 21st century.




Got a comment or question about this post? Feel free to use the Ask Cullen section, leave a comment in the forum or send me a message on Twitter.

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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  • http://pragmaticcapitalism michael schofield

    The public will demand action. We won’t get it from congress. That leaves the fed and thier very small stick. All we can do at this point is hope and trade.

  • Mightybillfuji

    Why can’t the Fed/Treasury combo do one thing to surprise the market.

    Fed comes out with operation twist. Simultaneously, the Treasury announces the creation of a new 50 year T bond.

    Talk about smashing long term rates in the mouth. Wouldn’t that drop long term rates and expectations, give a tremendous breather to maturity payments especially with getting the short money into the longer bond and make things like 40 year mortgages possible?

  • Nephric

    If the Fed does Operation Twist they will sell their short term treasuries and buy long term treasuries as Bill Mitchell describes in this clip:

    Now, based on the following (old) analysis gold trends inversely with real short term yields, as defined by subtracting the annual change in the US Consumer Price Index from the yield on one-year US Treasury Bills:

    So, I am long gold now (as are you, I believe, CR) but if Operation Twist is instituted as it was in the 60s I would consider changing my position to short gold since real short term yields may rise to be positive (depending on inflation too) maybe causing people to sell their gold and invest in short term Treasuries. Thoughts from this highly informed group?

  • Alan

    Going to the Fed for help in a balance sheet recession seems like going to the Department of Motor Vehicles when your car is on fire. You need the Fire Department.

    Cullen…aside from holding the economy’s hand, is there much for the Fed to really do right now? Aren’t the fixes all fiscal side?

  • VII

    Were 40% cash.
    Reading your post here Cullen(havn’t gone to links yet)

    I’m gonna have to watch from the sidelines on this one. I havn’t got a clue people. We received negative data on Oil, positive on Agri, mixed on Gold and yet as Cullen mentioned…”if you hear explicit rates on bonds.. you might as well pile into every inflation trad you can….”

    What a way to invest. If they say this you do this. If they do this you buy this.

    Good post Cullen…I’ll be the first one here on Wed. to listen to you and beowulf make sense of all this.

    BTW- In L.A I just emptied my pockets filling up my car this weekend. If Oil does in fact reverse on any inflationary trade my son will go back to full time breast feeding to save money. My wife better get that pump cranking…these solutions have become problems for my family.

  • boatman

    well, i guess i don’t know how old your son really is, but i can promise you real human mother’s milk is light years better……’course we both know who will really make that decision.

  • http://merrillovermatter.blogspot.com Greg Merrill

    Why do I think of this guy when Wednesday’s speech comes to mind?

    Operation Twist part Deux?


  • Moe Gamble

    Even the Fed can’t be stupid enough to excite inflation expectations by announcing unlimited buying of the 10-year or anything like that when Brent is at $109.38. If you watch the charts at consumerindexes.com, you can see that consumers fall off a cliff when gasoline hits $3.90-$4.00. The proof that the government and Fed now realize this is the timing of the recent SPR release.

    Gregor MacDonald, an excellent energy analyst, has argued that the gov’t can do exactly two more such releases before losing all oil pricing power, because at two more releases the market will move squarely into inventory restocking. Germany has already nixed any international cooperation in further SPR releases.

    The charts say the dollar is headed up and gold is headed down. I suspect Operation Twist will have the effect Nephric suggests. Notice that the first Operation Twist was designed to stimulate while protecting the dollar.

    Oil should go down with a rising dollar unless we just simply are in supply trouble again, which is a real possibility. If oil starts another spike, none of the rest matters.

  • VII


    We have some good data that supports oil lower, gold correcting short term and the dollar rallying. But..my graphs and data on oil did not prevent mr. pump from sticker shocking me this weekend. I was ready to start throwing out passengers. Good post by you..I wonder if my next sentence will make it to print without me editing it. (Trixie will love this one).

    “you can see consumers fall off a cliff when gasoline hits 3.90 -4.00″.

    Well..your 100% correct. not only will I fall off a cliff but me and my son will be eating breast milk to save money if this keeps up.

    Yes..I’d give thumbs up to everyones post here. I am very interested in reading you comments this Wednesday Cullen on the Fed. I hope beowulf and others shed some light on actionable steps investors can take or what XXX policy will ultimatley do good or bad.

  • brianr820

    The fed is going to dissappoint markets I fear.

    ON A SIDE NOTE: ask z gold standard groupie why finding a billion tons of gold in Kansas when on the gold standard (or any new gold, even) wouldn’t ruin the economy and bring the end of says but “printing money”will…


  • Leverage

    Here is my portfolio right now:
    – Strong short silver.
    – Long dollar, hedged for limited risk (against FED craziness, but I don’t think much will happen as Cullen).
    – Hedged shorting equities (I don’t think SP500 can really breakthrough up, but some crazy talk by the FED).
    – Long eurodollars (even with the liquidity swaps by CB’s announcement, I think a new credit crisis is coming and I hope I can benefit from it).

  • VII

    Thanks Leverage for posting your positions. You got skin in the game. You also have much more sophisticated positions than the average investor.

    Any purchase FOR ME would just be either lucky or really stupid. For ME. maybe not others. “Do you feel lucky punk….well do you” Clint Eastwood about sums it up for me this week.

  • Jb

    Cullen, don’t you agree that operational twist and quantitive easing are different in the sense that operational twist doesn’t expands fed’s balance sheet? I think this is key as the fed it totally loosing it’s credibility and the last thing they need at this stage is continue to expand the balance sheet. What’s your view on this?

    Also think markets can easily be disappointed.. Looking at equities it doesn’t look massive damage has been made, and don’t see the need of massive fed intervention.. Looks like the focus is more around europe

  • http://www.pragcap.com Cullen Roche

    Yeah, operation twist is even more worthless than QE2 because it doesn’t even add to the Fed’s B/S. It’s just shuffling cards in the same deck and trying to convince everyone that the deck is different afterwards. At least QE2 has a portfolio reblancing effect and in order for OT to work they’d have to drop the short purchases and be a willing buyer of all bonds at the long end. It’d be more than a twist. It’d be a good old fashioned shootout with the bond market and the Fed would win. But they won’t do it.

  • http://economicdisconnect.blogspot.com/ GYSC

    “Except this baby is crying all the way to the market and making a big fuss over nothing. Unfortunately, everyone else in the car is being forced to listen to this endless bantering as we drive full speed into a wall.” Awesome summation!

  • Malmo

    Didn’t Bernanke signal in Jackson Hole that fiscal policy is where the game needs to be played in the near term? My guess is that he won’t do a thing outside of tweaked language come Wednesday.

    But then there’s folks like Chris Whalen who believe that government has used all its fiscal bullets to little or no effect, and that more of the same is essentially worthless at this juncture:


    He’s no MMT’er, but like him I think it’s high time that creditors finally take the needed haircuts so real healing can commence.

  • VII


    I capitulated earlier with some thoughts ruminating in my head and then I read a thread somewhere else and I might as well post it in relation to this Wednesday.

    We may do some stuff on the basis that all my thinking and data says one thing and I know everyone confirms what I have concluded. When ever the market is a sure bet one way it tends to do the opposite. So..what I didn’t say was while I’m totally confused I may in fact move contrary to what my bias is telling me if only because I’m so sure with everyone else the seasonal headwinds of Sept. Oct. are about to get ugly. It can’t be that easy…

    I may make some moves here but will post it after the close. Not that anyone cares what I do but I want to make sure if I drive off the cliff no one snuck into my car.

    I always notice when things appear to have no other course to take then the one we all have concluded. And then I read Ritholtz post and I couldn’t help to conclude there are blind spots in my analytical reasoning. He lays it out but I’ve felt this heading into this week.

    I think this week is a coin flip…but one in which no matter what it come up as I have decided it’s heads only because there is no way I could be wrong confirmed by many. Thus…I’m going to take contrary action to what the data so clearly and easily tells us all.

    “to outperform, you sometimes must go against the crowd, despite the appeal and seeming safety in numbers. you must be humble and willing to admit error; meaning you’ll have to overcome your ego’s predisposition to avoid embarrassment”

    Everywhere I read…”be safe, avoid risk, stick to quality” I don’t deny Europe, Greece, etc et al. but If Wall st. tells me to buy a house. I sell. If Wall St. tells me to take risk the market is going to 1450 on 120 EPS and is cheap I sell. If Wall st. tells me to be safe….I’m taking the condom off, throwing the helmet away, cancelling my insurance and driving 150 mph naked on a ducatti 999s black on black at night with no moon down the 405.

  • JWG

    Keynesians are never wrong; whatever the stimulus was, it just wasn’t big enough. Stagflation is impossible; the data are flawed. Debt can never be excessive; for every debtor there is a creditor. Velocity of money? Keynesians go one better; they believe in “money multipliers”. Of course banks lend reserves; what else would they be for? Horizontal and vertical money? What’s that? Minsky, Fisher, Levy, Hayek et al; who are they?

    The fact that these cargo cultists are currently formulating the government’s economic policies is all we need to know about the depth of the trouble we are in.

  • suckmybishop

    As far as I’m aware, the Fed has not recently come out and claimed that they can fix our economic woes. I thought that even Bernanke was saying that fiscal policy would be a more appropriate means of stimulating the economy.

    You argue pretty well that the Fed can’t do much substantive at the moment, but indeed the Fed has been pretty much doing that year to date– nothing substantial. maybe except quietly targeting 0% 2-yr rates.

  • prescient11

    I think those who continue to moan and groan that the Fed is out of options are going to be very very surprised very shortly.

    But, who the heck knows!

  • beowulf

    “If Oil does in fact reverse on any inflationary trade my son will go back to full time breast feeding to save money. My wife better get that pump cranking… these solutions have become problems for my family.”

    “If a problem cannot be solved, enlarge it.” — Dwight D. Eisenhower (my gf disagrees on this point. Sometimes I think she was rooting for the Germans).

    “Women all over the country are cashing in on what people are calling a mother’s natural liquid gold: human breast milk. A month’s supply can cost anywhere from $300 up to $1,200 dollars. In contrast, a month’s worth of formula costs an average of $200.

    For Kamilla Vainshtok and other women like her, the transactions – all done online – can literally “pump up” their income. “Onlythebreast.com is basically a Craigslist for breast milk,” Vainshtok told “Good Morning America.” “There’s buyers and sellers, there’s an opportunity for them to meet each other.”

  • Detroit Dan

    Gold is pure speculation and folly. Fools buy gold saying it is a currency, but it is obviously not a currency. Purely a superstitious investment…

  • Detroit Dan


  • http://www.pragcap.com Cullen Roche

    Onlythebreast.com – I had to visit to make sure you weren’t pulling our legs. They deserve some sort of award for a name like that. Your knowledge (does this count as knowledge?) truly has no end…..

  • beowulf

    The fact that these cargo cultists are currently formulating the government’s economic policies…
    That’s an absurdly untrue statement. Real-life cargo cultists have a fairly accurate understanding of what ended the Great Depression, so they’d be an improvement over who we have now (it wouldn’t hurt that they’d instantly hire David Frum).
    For us, America is very good,” said village chief Isaac Wan, 67, the leader of the cargo cult, barefoot but dressed in a smart American naval officer’s uniform and sitting under a large US flag.
    “There’s a friendship between Tanna people and America from the war. When they came here looking for people to help them build airstrips and carry their supplies, we gave them 1,000 men”…
    They were impressed by the large amounts of cargo – tanks, weapons, medicine and food – brought by the US military. The shadowy spirit figure they already believed in gradually assumed a name and a nationality – Jon Frum is believed to be a contraction of John From America, a reference perhaps to a soldier who showed particular generosity.


  • casanova
  • beowulf

    “Onlythebreast.com – I had to visit to make sure you weren’t pulling our legs.”

    Nahh, on my gravestone will be this epitaph, “He kept it real”. :o)

    I assumed someone somewhere had already recognized the income stream VII was neglecting, 10 seconds of googling led me that ABC News article. My gf was reading over my shoulder as I typed the comment and thought VII would do well not to mention the idea to the Mrs.

  • http://www.pragcap.com Cullen Roche

    Yes, turning your wife into a milk machine would not be my recommended form of income generation. :-)

  • Anonymous

    thats fine, but chaotic.

    consumer debt pays inflation and economic activity forward, its not actually stimulative. someone runs up $5k on credit cards, thats $5k spent into the economy THEN, and probably $8k taken out of it sometime in the future.

    MMT is the best thing going by a country mile, but I wish they would point out more than “debt” is not creation of more currency (which will ultimately be needed to support ever higher levels of economic acctivity). As US Govt “debt” isn’t really debt at all, but facilitation of savings/creation of new currency/etc. (quite equivalent to a big gold find on the gold standard), its a different animal.

    Consumer debt just robs the future to pay today, in inflation and economic activity. The situation we are in is largely a function of INADEQUATE deficits from the govt, they have no created enough currency to support the level of economic activity that the country aspired to.

  • VRB II

    ” if a problem can not be solved enlarge it”
    U r the funniest dood.
    When u say my girlfriend… I keep thinking .. With a wit and humor like yours you’d be the king of intellectual swinging.
    If there as such a thang.
    I just keep laughing …. I don’t even know how to come back from your posts.

    Your on a different level man. Hilarious.

    All I can say is in defense of my silliness today… I have none.

  • Leverage

    My take on this is:
    – Ok, Wall St. is saying be cautious, this means stay out of equities. Does not mean don’t be short/long. So what’s the contrarian view: stay in equities.
    But, I wasn’t very exact when I said I was short equities hedged. Actually what I’m betting is on volatility.
    – What Wall St. is saying really is: don’t bet on volatility. Well, that’s exactlly what I’m doing. IMO isnot the time to hold positions on equities, but is the perfect time to be long on options. Because my own bias is towards downtrend, I’m a bit stronger on long puts, but I’ve all some hedge on long calls.

    So what I’m saying is: this market is not gonna stay much longer where it is (my opinion is, we will resume the downtrend towards the SP500 900’s), it just overreacted a bit and dropped to fast, with panic selling discounting a recession that had not yet arrived. But when the recession arrives, what will happen? Are we at the bottom already? I don’t think so, but meanwhile we can see a small rally from the current levels just to resume the drop when we hit a strong resistance level.

    But again, I’m just an anonymous poster on this excellent website, so what do I know. I could be probably wrong. At the end, is what you (any) thinks, what counts.

  • boatman

    volker’s in the rocking chair….

    we’re gonna cure all this with cheap money and more debt and higher taxes…..the modern way.

  • http://borasky-research.net/about-data-journalism-developer-studio-pricing-survey/ M. Edward (Ed) Borasky

    It was interesting to watch a recent GOP debate and hear *all* of the candidates call for firing Bernanke. Sure, he’s the Chairman, but he’s not the *whole* Fed. In the end, though, you’re right. It doesn’t seem to me like the “dual mandate” of the Fed – control both inflation and unemployment – is something that can be done with monetary policy alone.

  • exporter52

    If the Fed is allowed to, they should just buy mortgages and clear all this crap out.
    If not,let them turn them in to all GNMA’s and buy them up.
    They can shake down the banks later and over time for the cost. I mean if BOA can pay Buffett 6% they can surely set up something with the Fed. Can someone please tell me what the real price tag is on this mortgage mess….does any one really know?
    Is this to simple?

  • VII

    My attorney just split each producing milk agent into seperate wholly owned entities. One is a Sole Propiertership owned by my son..what he does with his reserves is his business. At 6months 3 weeks I think I’ve taught him all I can on how to run a business. He’s cut off.
    I’ve formed an LLC for the working interest I have.

    Yes…Trixie..what your thinking is correct. I could be sleeping somewhere in the Valley if my wife reads this post.

  • VII

    Leverage…well said. I have very similar views to you on the market.

  • beowulf

    “If there as such a thang.”
    Yes, there IS such a thang.

    “Simple Pickup: Are these the greatest pickup artists of all time?”

    Sadly though, like a Marine sniper who excels at taking out Viet Cong generals from a mile away, there are some skill sets that atrophy with age and responsibility.

  • VRB II


    I’ve always thought of generals as rare and few but you make Viet Cong generals sound like a hyandui in Irvine, CA.

    I wanted to thank cable for allowing you time away from writing for the Colbert report and the daily show.

    My world has expanded..I just wish u didn’t give the pick up lines to everyone..I wish u just sent that link to..”no honey..I’m working”

    Your on a different level Beowulf.

    Looking forward to your thoughts on the fed tomorrow…It really helps. Thanks in advance. Throw in some zingers I have a feeling the markets take on the fed will be different than mine…so a little humor will be the elixir to keep me sober.

  • http://hitormiss.yolasite.com/hit-or-miss.php Trixie

    Ok, Beowulf, riddle me this:

    What is the name of the upside punctuation mark sometimes used at the beginning of a Spanish sentence?

    As in:

    ¿Qué es eso?

  • beowulf

    “What is the name of the upside punctuation mark sometimes used at the beginning of a Spanish sentence?”

    Se llama signo de interrogación de apertura o signo de exclamación de apertura.

    Oh wait, did you want that in English? Inverted question mark or inverted exclamation mark (though translated literally, the Spanish terms use “opening” instead of “inverted”).

  • http://www.pragcap.com Cullen Roche

    I’ll take a guess – crazy talk?¿?¿?¿?¿

  • http://www.pragcap.com Cullen Roche

    Just kidding, I think it’s called an inverted mark, no?¿ I grew up in a Spanish speaking household so I should know that stuff. Unfortunately, I haven’t spoken Spanish fluently in many years so my opinion here is worth dog doo…..

  • http://www.pragcap.com Cullen Roche

    You have finished the internet haven’t you? What excites you now?

  • beowulf

    I appreciate it thanks. Actually, Orange County is well stocked with Vietnamese generals. But since they were all on our side, my “by the book” lieutenant probably has them all on the “do not kill” list. Ehh, everyone has a boss.

    All kidding aside, I met a Marine sniper once while working on a business deal whose non-war stories were more amazing than his war stories. He was still in the reserves and he was telling me how the US Govt would fly him and his fellow reservist snipers (all middle aged guys with civilian careers) to hot spots in the guise of tourists. After getting settled at their hotel, someone from the US Embassy would meet them with a package… and in the package were NOT shower rods. In the instance he told me about, US troops were in the process of leaving a country they’d been deployed as peacekeepers. As the last troops were getting ready to leave by ship, the tourists and their not-shower rods were on rooftops around the port in case someone tried to attack the troops as they were leaving. As it happens, no fuss no muss. The embassy sent someone over to retrieve the package (can’t take those on an airplane) and they flew home.

  • http://hitormiss.yolasite.com/hit-or-miss.php Trixie

    “You have finished the internet haven’t you? What excites you now?”


    I have this friend that has tormented be for years now about why the inverted question/exclamation mark in Spanish doesn’t have a name. And don’t I think it SHOULD have a name? My response is always the same: I don’t KNOW. But over time you start to question your own existence.

    So I finally did it. I asked Google “¿Why?”. And yes, it was as humiliating an experience as you can imagine. But it was worth it since if I found my answer, I likely would have discovered the last page on the internet.

    I just wanted to check with Beowulf in case I was missing something. Carry on, gentlemen.

  • B Ferro

    I think most here are missing the point of the post – the Fed is truly powerless now. In reality, their one and only weapon has always been rate reductions in the context of a non-balance sheet recession economy. They completely blew their load on that in late 08 / early 09. Now they’re left experimenting with crap like QE, which, as it turns out, is inflationary only to the end of one’s nose and beyond that, produces the very same deflationary tendencies they’re trying to fight. Beyond QE what are they left with, setting a specific date (i.e., 2013) or as it appears might be the case tomorrow, setting specific numerical targets for macro-economic data points (i.e., unemployment, etc.) whereby they’ll remove their extraordinary accommodation?

    And yet, despite all of the above, we still talk as if we cower in fear of this great monolithic institution which, almost like God, can snap its fingers and change the world we live in.

  • beowulf

    “When Alexander saw the breadth of his domain, he wept for there were no more worlds to conquer.”
    Ha ha, for a while I was only answering The Other Chris’s questions with quotations, that will never get old.

    As for the inverted question mark, starting with “upside down question mark” gave the English answer in two tries and the Spanish answer with the third (I don’t even speak Spanish). That’s what great about Google, you can assume any question someone asks you has already been asked online. For example, “What excites you now?” has 68,000 hits (from India,”Q: What excites you now? MAK: I will tell you what really excites me – the sight of a wild elephant”). As usual, Mak for the win.

  • VRB II


    Hi B.

    Getting mixed signals.
    BUY tech. 6 month bullish signals.
    BUY energy 8 month low positive 6 month out.
    2 nd leg down on SPX to start soon.
    Buy EM to outperform SPX next two months…

    I could go on. Not worth getting into here. No axe to grind for me just data trying I’m trying to siphon into money.

    Good to see your name B. Wish u the best as the year comes to a close.

  • Bill X

    QE IS debt monetization and money printing. Real inflation according to John Williams at shadowstats.com is 11%. The Federal Reserve is destroying the dollar. It’s only a matter of time before we have hyperinflation like Germany had in the 1920s.

  • http://www.pragcap.com Cullen Roche

    Come on. John Williams also guaranteed hyperinflation this year. That one couldn’t have been more wrong. Also, can you ask John why he is collecting dollars through his subscription service? Doesn’t it seem odd to you that this man, who predicted the collapse of the USD this year, is busy collecting them? Do the math….