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Ouch! The Bundesbank Slaps The Fed In The Face
Be prepared for the next great transfer of wealth. Buy physical silver and storable food.
testosteronepit.com / November 14, 2012, 9:00 PM
“Yellen and Cisco lift US stock futures,” the headline read enticingly in the morning. Priceless. Their combined pronouncements were driving up the markets, it seemed. Cisco CEO John Chambers is famous for adding adjectives during earnings calls that cause or predict crashes; his use of “very lumpy“ to describe demand for Cisco products in November 2007 unleashed a round of mayhem. But to everyone’s great relief, he kept any errant adjectives to himself during the earnings call, though he did admit that the “macroeconomic environment” was “challenging” and that “order trends in Europe” were “very challenging.” But not “very lumpy.”
The other spark that goosed the futures, according to the headline, wasn’t a corporate giant, but Federal Reserve Vice Chairman Janet Yellen who is rumored to have a shot at becoming Chairman, if Ben Bernanke decides to abandon ship in early 2014. Her words weigh. So late yesterday, she extended the Fed’s Zero Interest Rate Policy (ZIRP) even further. It had already been extended and re-extended and now is scheduled to run until mid-2015. But she extended it to eternity apparently when she said that she was “strongly supportive” of decoupling rate increases from the calendar and pegging them instead to the unemployment rate.
She followed in the footsteps of Chicago Fed President Charles Evans, who’d proposed to keep ZIRP effective until the unemployment rate dropped to 7%. Minneapolis Fed President Narayana Kocherlakota too had backed that idea, but his trigger would be an unemployment rate of 5.5%! An elusive date is to be replaced by an equally elusive unemployment rate. ZIRP forever!
Yellen also explained that the Fed’s 2% inflation target—based on PCE, so maybe 3% CPI—is not a “ceiling” but a guideline. Or perhaps a floor; a policy that might lower the unemployment rate, she reassured us, would lead to inflation above the guideline. So her plan is clear: wealth confiscation will continue through yields that will remain below inflation year after year until bond investors and savers have been bled dry. And if investors don’t like getting bled dry the slow way, the Fed keeps implying, they need to invest in riskier assets, such as the stock market, in order to re-inflate the bubbles that had been so devastating already.
Thanks to BrotherJohnF
2012-11-15 20:42:58
Source: http://silveristhenew.com/2012/11/15/ouch-the-bundesbank-slaps-the-fed-in-the-face-2/
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