The Fed will be a New Creature Soon, and No One Knows What It’ll Look Like

Markets are blowing off this uncertainty for now.
On Thursday, the Senate confirmed Randal Quarles, President Trump’s first Fed nominee, as a member of the Federal Reserve Board of Governors. During his confirmation hearing, Quarles said it was time to roll back some of the regulations that were imposed on banks after they’d imploded and threatened to take down the global financial system. He will become the chief bank regulator at the Fed, filling the slot that Daniel Tarullo left behind when he resigned unexpectedly in April.
Quarles is founder of private investment firm, The Cynosure Group. Fed Governor Jerome Powell is also a Cynosure alumnus. Quarles had been a partner at private equity firm The Carlyle Group and served as undersecretary of the Treasury under President George W. Bush. WHIRRRR makes the revolving door.
One down, four more to go.
The Fed’s Board of Governors has seven slots, currently chaired by Janet Yellen. After Quarles’ appointment, potentially four more will need to be filled over the next few months.
The seven board members are part of the policy-setting 12-member Federal Open Markets Committee. The other five members of the FOMC are the president of the New York Fed and on a one-year rotating basis four presidents of the remaining 11 regional Federal Reserve Banks.

This post was published at Wolf Street on Oct 6, 2017.

The Irony of Stable Inflation

In February 2000, the FOMC quietly switched from the CPI to the PCE Deflator as its standard for inflation measurement. There were various technical reasons for doing so, including the CPI’s employment of a geometric mean basis (which was in 2015 finally altered to a Constant Elasticity of Substitution formula). But it was one phrase that in hindsight did the Fed no favors, as it explicitly cited the expected fruits of the PCE Deflator’s methodology which would ‘avoid some of the upward bias associated with the fixed-weight nature of the CPI.’
I am not a conspiracist by any means, but there are times when you have to shake your head as these economists lack even a modicum of self-awareness. The central bank has been given a legal mandate for price stability, so the average American might wonder why that central bank is allowed to choose the measure most inherently stable (and low). At the very least, it seems like a conflict of interest, one among so many.
In that regard, the last five years have been almost fitting. The PCE Deflator has, as expected, avoided the higher beta tendencies of the CPI and in both directions. For that, it has remained stable, alright, but stable below target no matter what the Fed does with its own balance sheet. I hope the irony is not lost on them, especially as it was oil prices that ‘achieved’ what they could not despite considerable expenditure on their part.

This post was published at Wall Street Examiner on May 1, 2017.

Yellen Grilled on Fed Partisanship

Just days after Donald Trump accused the Federal Reserve of playing politics with low interest rates during the first presidential debate, Congressman Scott Garrett challenged Chairman Janet Yellen today on whether Fed officials were guilty of playing politics this campaign season. In particular, Garrett questioned the actions of Fed Governor Lael Brainard who raised eyebrows earlier this year by donating the legal maximum to Hillary Clinton’s campaign.
Since the Fed’s decision to maintain low interest rates is widely seen as benefiting Hillary Clinton, and given that Brainard’s actions opened herself up to what Garrett described as ‘the appearance of conflict,’ Garrett asked whether she had recused herself from the FOMC. Yellen responded that Brainard did not, was not asked to, and was not barred from donating to political campaigns according to the Hatch Act.
Garrett pushed further. Noting that multiple media outlets have been openly speculating about a potential role for Brainard in a Clinton administration, the congressman asked Yellen whether such a conversation between Brainard and Clinton would be a violation of Fed policy. Yellen responded by saying that while she would need to check with Fed lawyers, she didn’t see any conflict.
That’s right, according to Janet Yellen, there is nothing wrong with a sitting Federal Reserve official lobbying a presidential candidate for a future job, even though they have the ability to vote on Fed decisions that can dramatically impact the American economy.

This post was published at Ludwig von Mises Institute on Sept. 28, 2016.

Monetary Insanity: When It Doesn’t Work – – Just Promise To Keep Doing It Until It Does

On July 14, 2006, the Bank of Japan raised its benchmark overnight rate off zero for the first time since introducing the world to ZIRP in 1999. In doing so, the BoJ noted that the Japanese economy in its view continued to ‘expand moderately’ and that risks inside the economy were ‘balanced.’ The central bank also sought to reassure, further commenting that despite one 25 bps rate hike ‘an accommodative monetary environment ensuing from very low interest rates will probably be maintained for some time.’
These words, all of them, should sound frighteningly familiar, as they are being redeployed in nearly exactly the same phrasing by the Federal Reserve. Whether or not the FOMC votes for a second rate hike today still remains to be seen, as before that ‘news’ there is first the BoJ once more admitting that its prior efforts didn’t actually work. For the record, Japanese officials actually carried out two hikes, a second coming in February 2007 just in time for the open minded to finally see what really had been going on in the global economy.
In other words, the Japanese policymakers made the same mistakes as are being made today. They assumed absence of further contraction was the same as recovery. In the singularly binary model of orthodox economics, if an economy isn’t in recession it must be growing; so if the economy isn’t in further recession and the economy is barely growing or even stagnating then it is assumed that growth is just being delayed. By the middle of 2006, the Bank of Japan believed there were enough signs the economic postponement had ended.

This post was published at David Stockmans Contra Corner on September 21, 2016.

Will the Bank of Japan cause a Global Bond Tantrum?

As investors anxiously await the key monetary policy decisions from the Federal Reserve and the Bank of Japan next week, there have been signs that the powerful rally in bond markets, unleashed last year by the threat of global deflation, may be starting to reverse. There has been talk of a major bond tantrum, similar to the one that followed Ben Bernanke’s tapering of bond purchases in 2013.
This time, however, the Fed seems unlikely to be at the centre of the tantrum. Even if the FOMC surprises the market by raising US interest rates by 25 basis points next week, this will probably be tempered by another reduction in its expected path for rates in the medium term.
Instead, the Bank of Japan has become the centre of global market attention. The results of its comprehensive review of monetary policy, to be announced next week, are shrouded in uncertainty. So far this year, both the content and the communication of the monetary announcements by BoJ governor Haruhiko Kuroda have been less than impressive, and the market’s response has been repeatedly in the opposite direction to that intended by the central bank.
As a result, the inflation credibility of the BoJ has sunk to a new low, and the policy board badly needs to restore confidence in the 2 per cent inflation target. But the board is reported to be split, and the direction of policy is unclear. With the JGB market now having a major impact on yields in the US, that could be the recipe for an accident in the global bond market.

This post was published at David Stockmans Contra Corner By Gavyn Davies, Financial Times ‘ September 19, 2016.

Mission Creep – How the Fed will Justify Maintaining its Excessive Balance Sheet

FOMC have changed their normalizing strategy several times and we now see the contours of yet another shift. The Federal Reserve was supposed to reduce its elevated balance sheet before moving interest higher as it would be impossible to increase the fed funds rate in the old fashioned way when the market was saturated with trillions of dollars in excess reserves. When it finally dawned on the FOMC that selling large quantities of TSY and MBS into the market was probably not a very bright idea, they created the O/N RRP to be able to raise rates without draining the financial system of reserves beforehand. Still, the thought of selling, or more accurately not rolling over, trillions worth of government debt, when SWF’s and foreign FX managers are desperate to raise USD is still not something the FOMC even want to contemplate.
So a case needs to be built for the FOMC to justify maintaining its bloated balance sheet indefinitely; conveniently enough ex-FOMC member Jeremy Stein with his Harvard colleagues Robin Greenwood and Samuel Hanson did just that in a paper called ‘The Federal Reserve’s Balance Sheet as a Financial-Stability Tool’ presented at the Jackson Hole Symposium.
Their argument is simple. When the FOMC starts to raise rates, demand for positive yielding cash-like instruments will increase, thus re-enabling financial institutions to use the commercial paper market to fund themselves cheaply and enjoy a positive carry on their maturity transformation. As our chart below shows, commercial paper outstanding, with extremely short duration, grew exponentially prior to the GFC as financial institutions used the wholesale market to fund illiquid and longer dated positions.

This post was published at David Stockmans Contra Corner by Eugen Von Bohm-Bawerk ‘ September 3, 2016.

Heaps Of Lies

Since truth hardly matters anymore, we all get numb to the day-to-day barrage of falsities and outright lies that come at us every day. But something clicked today and caused me to simply stop and take it all in.
And even “take it all in” is an exaggeration on my part. I couldn’t take it all in if I wanted to. I simply paused this morning as I perused the headlines and let the lies and corruption wash over me for a moment.
Let’s start with The Federal Reserve. Not only is this organization named in a way that is intentionally trying to deceive you, their mission of sparking inflation through the endless creation of new fiat cash (upon which their owners can charge interest) is theft on a grand scale. All of your hard work, in the form of your accumulated savings, is being constantly devalued and stolen by these criminal bankers. But no, you’re told that The Fed is this omnipotent, altruistic and benevolent organization that works for the American people. Wrong! They work for their owners, first and foremost. And who are their owners? Their member Banks.
And then there’s this notion that The Fed must now raise the Fed Funds rate because “the economy is robust and strong”. Really? Last I checked, Q1 GDP came in at just 1.1% and the just-revised estimate of Q2 GDP is also just 1.1%. Even today, productivity has declined again while US manufacturing levels have collapsed to economic contraction levels.
Again, you’re being lied to. A Fed Funds rate hike by The Fed is NOT designed to benefit you or the general economy. Instead, it’s designed to benefit The Fed’s member Banks. How and why is hard to know but, like every other Fed decision from TARP to QE, the moves the FOMC and Fed make are ALL designed with The Banks’ best interests at heart, not yours. Is this what you are told on CNBS or BBG? Of course not. Instead, just lies and deception in order to pump an agenda.

This post was published at TF Metals Report on September 1, 2016.

From Euphoria To Despair And Getting Nowhere

For October 2014, the ISM estimated that its Chicago Business Barometer was a blistering 66.2. Encompassing much of the Midwest and a good deal of auto and parts production, that level seemed to make sense. As any economist would say then, the US economy was on the verge of a breakout and according to the labor statistics maybe even one of unusually good strength and duration. Two months later, however, the Chicago BB was down almost eight points to 58.3; just two months after that, for February 2015, the PMI was shockingly below 50 and quite far below at 45.8.
Since then, the index has been all over the place. It almost counts more as entertainment than actual meaningful interpretation from month to month, but there is, I think, something useful to the overall sawtooth of the past two years. It is emblematic of the unevenness of this economy as it swings from very real recession fears to almost pure elation of seeming to skate by; only to see such jubilation ruined in short order all over again. There is information in the schizophrenia.
After falling below 50 again in summer 2015, the PMI was above 54 in July and August, only to drop to 48.7 in September in the aftermath of ‘global turmoil’ – and then rebound to 56.2 by October as the FOMC assured the world there was nothing lasting about it. Of course, the Chicago BB instead fell to a ‘cycle’ low of 42.9 in December before jumping almost 13 points in January alone, to 55.6 – and then dropping back below 50 again in February.

This post was published at David Stockmans Contra Corner by Jeffrey P. Snider ‘ September 1, 2016.

Housing Starting To Suggest Where Autos Already Are?

In yet another data point that identifies depression rather than a Great Recession, the Wall Street Journal reported last week what most people outside the economics profession had realized a long time ago. Janet Yellen likes to say that the housing market is recovering, highlighting the economic sector as one of the few bright spots left. The FOMC regularly and officially makes mention of it, largely for the same reason.
As with everything else in this economy, however, that something is not getting worse does not immediately indicate that it is getting better. The housing market has been out of its crash for five years, but that is not at all the same as a housing recovery. Monetary policy interference is still interference, even if it is done with the best of intentions.
The housing recovery that began in 2012 has lifted the overall market but left behind a broad swath of the middle class, threatening to create a generation of permanent renters and sowing economic anxiety and frustration for millions of Americans…

This post was published at David Stockmans Contra Corner by Jeffrey P. Snider – August 16, 2016.

How To Restore Honest Capital Markets – – Abolish The FOMC

…… The approximate hour Janet Yellen spends wandering in circles and spewing double talk during her post-meeting pressers is time well spent. When the painful ordeal of her semi-coherent babbling is finally over, she has essentially proved that the Fed is attempting an impossible task.
And better still, that the FOMC should be abolished.
The alternative is real simple. It’s called price discovery on the free market; it’s the essence of capitalism.
After all, the hot shot traders who operate in the canyons of Wall Street could readily balance the market for overnight funds. They would do so by varying the discount rate on short-term money.
That is, they would push the rate upwards when funds were short, thereby calling-in liquidity from other markets and discouraging demand, especially from carry trade speculators. By contrast, when surplus funds got piled too high, they would push the discount rate downward, thereby discouraging supply and inciting demand.

This post was published at David Stockmans Contra Corner on August 9, 2016.

Chart of The Week: They Really Don’t Know What They Are Doing Version

Given it is payroll Friday, it has to be a chart related to the futility of focusing on the headline number. There is any number of ways with which to accomplish this, but it serves well to highlight the relationship already presented in my view of this specific view of the payroll report. Economists often claim that the participation problem isn’t really a problem because of demographics, and when they don’t make the claim they just ignore it altogether.
In August 2014, Janet Yellen spoke about the challenges this unique labor environment would present as the FOMC contemplated ‘full employment’ as a real possibility.
Estimates of slack necessitate difficult judgments about the magnitudes of the cyclical and structural influences affecting labor market variables, including labor force participation, the extent of part-time employment for economic reasons, and labor market flows, such as the pace of hires and quits. A considerable body of research suggests that the behavior of these and other labor market variables has changed since the Great Recession. Along with cyclical influences, significant structural factors have affected the labor market, including the aging of the workforce and other demographic trends, possible changes in the underlying degree of dynamism in the labor market, and the phenomenon of ‘polarization’ – that is, the reduction in the relative number of middle-skill jobs.
She adds nothing about the huge, yawning overall lack of recovery, just hints at why it isn’t the Fed’s fault that the recovery when it does get to full might not be as full as in the past.

This post was published at David Stockmans Contra Corner on August 5, 2016.

The Myths The FOMC Keeps Repeating Is What Matters, Not the Words It Changes

As usual, everyone is focused on the wrong part of the FOMC statement. There is already a lot being made about the one sentence inserted as ‘hawkish’ sentiment that puts the economy, supposedly, back on its fruitful, ‘full employment’ track. In a clear sigh of relief undoubtedly in relation to the scary May payroll report, the July 2016 FOMC statement confidently announces:
Near-term risks to the economic outlook have diminished.
Why anyone would give it any weight at all is a mystery. The FOMC has been making the same declaration intermittently for almost two years; only to have to retract it as ‘global turmoil’ randomly, in their view, intrudes.
What truly disqualifies the economic assessment, indeed all their economic assessments, is not what changes from meeting to meeting but what remains. One year ago, just as the summer was about to heat up in far too many ways, the July 2015 policy statement included this passage:
Inflation continued to run below the Committee’s longer-run objective, partly reflecting earlier declines in energy prices and decreasing prices of non-energy imports. Market-based measures of inflation compensation remain low; survey based measures of longer-term inflation expectations have remained stable.
The version in July 2016 says this:

This post was published at David Stockmans Contra Corner by Jeffrey P. Snider ‘ July 28, 2016.

What The FOMC Keeps Repeating Is What Matters, Not What It Changes

As usual, everyone is focused on the wrong part of the FOMC statement. There is already a lot being made about the one sentence inserted as ‘hawkish’ sentiment that puts the economy, supposedly, back on its fruitful, ‘full employment’ track. In a clear sigh of relief undoubtedly in relation to the scary May payroll report, the July 2016 FOMC statement confidently announces:
Near-term risks to the economic outlook have diminished.
Why anyone would give it any weight at all is a mystery. The FOMC has been making the same declaration intermittently for almost two years; only to have to retract it as ‘global turmoil’ randomly, in their view, intrudes.
What truly disqualifies the economic assessment, indeed all their economic assessments, is not what changes from meeting to meeting but what remains. One year ago, just as the summer was about to heat up in far too many ways, the July 2015 policy statement included this passage:
Inflation continued to run below the Committee’s longer-run objective, partly reflecting earlier declines in energy prices and decreasing prices of non-energy imports. Market-based measures of inflation compensation remain low; survey based measures of longer-term inflation expectations have remained stable.
The version in July 2016 says this:
Inflation has continued to run below the Committee’s 2 percent longer-run objective, partly reflecting earlier declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation remain low; most survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months.

This post was published at David Stockmans Contra Corner on July 27, 2016.

Second Wave A Second Time

It seems as if the FOMC still doesn’t know what to make of itself. In June, the May payroll report released earlier that month clearly spooked them; not even Esther George bothered to dissent in favor a rate increase. Since then, the world seems so much better. The media tells us with every new economic release how ‘strong’ the economy has become. And they won’t let us forget that stocks are at, or are near, all-time highs.
These are all part of what policymakers told us in late 2014 would happen. At that time, the labor market statistics were more than suggesting ‘full employment’ to economists, which meant so many good things that it would be up to the Fed to lightly spoil the fun. Then 2015 happened, catching central banks unaware and leaving them as equally unprepared spectators.
Despite the great run of late nobody expects the FOMC to do anything when it meets this week, betraying the 2014 narrative.
Since the policy-setting Federal Open Market Committee last gathered six weeks ago, economic reports have shown one example of U. S. resilience after another following a slow first quarter. When the monetary policy panel meets on Tuesday and Wednesday, a majority of investors expect them to do what they have done at every meeting this year: nothing.
This reluctance is, apparently, very hard to explain. It would be that way from a 2014 outlook that many still aren’t aware has been overrun. But, like the bond market ‘riddle’, the problem isn’t so much logic as perspective. The FOMC isn’t really sure why they aren’t really sure.

This post was published at David Stockmans Contra Corner on July 25, 2016.

Yellen’s Circular Blather And The Full Measure of Labor Slack

Near the start of her tenure, Janet Yellen in a speech given on April 16, 2014, at the Economic Club of New York declared monetary policy concerned with three big factors. The first was inflation and whether or not it was moving back to the 2% target, even though by then it had been almost two years since that was the case. The second was what are called ‘unforeseen headwinds.’ Early in the recovery estimates for the track of labor improvement and normalization of monetary policy went hand-in-hand; as the former gained, the latter receded. That never happened, as the unemployment rate had to that point largely met expectations but normalization was only then being discussed years behind original forecasts.
Yellen’s third factor was really her and the economy’s first – the labor market itself. She framed it under terms of ‘slack’, which the central bank uses to judge the appropriateness of any policy setting. Slack is the theoretical buffer between labor improvement and inflation, meaning that it is the very intersection between the Fed’s later two legal mandates (currency elasticity being its first task, having already failed badly at that, too). Because the Great Recession was so large and deep, it was expected that payroll normalization would take longer than usual. In April 2014, FOMC models predicted a further two years before ‘full employment.’
I will refer to the shortfall in employment relative to its mandate-consistent level as labor market slack, and there are a number of different indicators of this slack. Probably the best single indicator is the unemployment rate. At 6.7 percent, it is now slightly more than 1 percentage point above the 5.2 to 5.6 percent central tendency of the Committee’s projections for the longer-run normal unemployment rate. This shortfall remains significant, and in our baseline outlook, it will take more than two years to close.

This post was published at David Stockmans Contra Corner on June 22, 2016.

FOMC Meetings Are Irrelevant

For more than 7 years, the Federal Reserve has been promising to normalize U. S. interest rates. That was the initial promise, back at the end of 2008. Most people in the Western world have forgotten what ‘normal’ means with respect to interest rates, after the past 7 years of monetary insanity.
In general terms, normal interest rates mean rates in the range of 3 – 5%. However, given the extreme levels of indebtedness across the Western world, and the elevated level of ‘risk’ associated with such obvious insolvency, a ‘normal’ interest rate for these regimes would be more in line with a rate of 6 – 7%, if not higher. The financial joke here is that if any of the Western world’s Deadbeat Debtors did raise their interest rate to a rational level of 6 – 7%, that regime would be quickly bankrupted by (at least) a quadrupling of interest payments, on their gargantuan debt.
Therefore we in the West live in a world of permanent interest rate fraud: the most-insolvent nations on Earth have the lowest interest rates. Consequently, there are no ‘buyers’ for any of the fraud-bonds of any of these nations (i.e. there are no more lenders for these Deadbeat Debtors). Thus these economies have descended to the level of open Ponzi-schemes. The only way that these corrupt, bankrupt regimes can delay their own bankruptcies is by continuing to print-up (i.e. counterfeit) insane quantities of their worthless, paper currencies – and then using the one form of their worthless paper to ‘buy’ another form of their worthless paper. Pure fraud.
Propping up bankrupt economies in this manner is known by the euphemism ‘monetizing debt’, a phrase never heard from the vacuous sycophants of the mainstream media, because monetizing debt is what bankrupt regimes do, immediately before declaring bankruptcy. With this context in mind, let us return to the corrupt world of the Federal Reserve, and its farcical ‘FOMC meetings.’

This post was published at BullionBullsCanada on 16 June 2016.

Abolish The FOMC, Bring Back The Green Eyeshades

The approximate hour Janet Yellen spent wandering in circles and spewing double talk during her presser yesterday was time well spent. When the painful ordeal of her semi-coherent babbling was finally over, she had essentially proved that the Fed is attempting an impossible task.
And better still, that the FOMC should be abolished.
The alternative is real simple. It’s called price discovery on the free market; it’s the essence of capitalism.
After all, the hot shot traders who operate in the canyons of Wall Street could readily balance the market for overnight funds. They would do so by varying the discount rate.
That is, they would push the rate upwards when funds were short, thereby calling-in liquidity from other markets and discouraging demand, especially from carry trade speculators. By contrast, when surplus funds got piled too high, they would push the discount rate downward, thereby discouraging supply and inciting demand.
Under such a free market regime, the discount rate might well be highly mobile, moving from 1% to 10% and back to 1%, for example, as markets cleared in response to changing short-term balances. So what?

This post was published at David Stockmans Contra Corner by David Stockman ‘ June 16, 2016.

Unhinged Hollowing At The Moon – – Janet And The Fed Heads Blunder On

Whatever her other faults, and they are legion, Janet Yellen has impeccable timing. On the day the FOMC actually voted to raise the irrelevant federal funds rate, thus signifying to the world the soundness of the economic circumstances, the Federal Reserve calculated that industrial production had contracted for the first time (for the month of November). It was a significant shift, as IP is one of the longest and most reliable economic accounts in existence. The appearance of a negative number at the headline is reserved almost exclusively for recession; leaving the Fed to declare both recession and recovery on the very same day.
If that set up something of a debate or battle between competing narratives, it has only gotten worse for Yellen’s side. IP has since been revised lower such that the start of the steady contraction is now set two months earlier at September, and by the time the Fed ‘raised’ rates (RHINO) industrial production had actually declined by more than 2%; a level in the historical data that has precluded any other cyclical condition but recession.
Time and again with each new and ‘unexpected’ appearance of the negative sign, the refrain from policymakers and economists alike has been in unison, ‘but the labor market.’ With only an increasing degree of emphasis, themonthly chained variation of the Establishment Survey has been wielded over the past year and a half as if it was the actual stimulus itself (and there is a great deal to the accusation, rational expectations theory and all). The Fed is data dependent whereupon the ‘data’ is their own speechmaking.
My colleague Joe Calhoun put it best:

This post was published at David Stockmans Contra Corner by Jeffrey P. Snider ‘ June 6, 2016.

Another Shoe Falls – – U. S. Service Sector Now At Stall Speed

Markit’s Services PMI fell to just 51.2 in May, dropping a rather large 1.6 points from 52.8 in April. That meant the combined US Composite PMI, which puts together both manufacturing and services, was barely above 50, registering just 50.8. As with all PMI’s the distinction around 50 is unimportant, what matters is the direction and for more than a single month. On that count, services reflect what we have seen in manufacturing: that the ‘rebound’ in March and April was nothing more than a small relative improvement after the liquidation-driven start to the year. The economy didn’t get better, it for a few months just failed to get worse.
In terms of the Services survey, Markit reports several distressing indications including respondents’ views for the immediate future:
May data highlighted a renewed fall in business optimism across the service economy. Reflecting this, the balance of service sector firms forecasting a rise in business activity over the year-ahead eased to its lowest since the survey began in October 2009. Anecdotal evidence suggested that uncertainty related to the presidential election and concerns about the general economic outlook had continued to weigh on business confidence. [emphasis added]
While I don’t want to overemphasize individual parts of individual sentiment surveys, it is quite a contrasting summation with the apparent self-delivered economic approval of the FOMC to execute the next policy communication (rate hike in name only). And this is not manufacturing, it is the services component that is supposed to steer the economy far away from the ‘manufacturing recession.’ That was always a dubious proposition, particularly when so much of the supposed ‘services economy’ itself relates to the transportation, management, and then sale of goods.

This post was published at David Stockmans Contra Corner by Jeffrey P. Snider ‘ May 26, 2016.

Just Stop It!

The posse of fools in the Eccles Building is so petrified of a stock market hissy fit that it has more or less created a Wall Street doomsday machine.
After trolling on the zero bound for 89 straight months now, the FOMC falsely believes that it has levitated the U. S. economy to the cusp of full-employment via massive liquidity and wealth effects pumping.
As a consequence, it refuses to let the market have breathing room for even a modest correction, insisting that just a few more months of this monetary lunacy will permit a return to some semblance of normalcy.
But it never gets there. The truth is, this so-called recovery cycle is now visibly dying of old age and being crushed by the headwinds of global deflation. Rather than acknowledge that the jig is up, our feckless monetary politburo just equivocates, procrastinates and prevaricates about the monumental policy failure it has superintended.
So the casino punters just won’t go home. They hang around against all odds, failing to liquidate and thereby enabling the robo machines to engage in endless and pointless cycling between chart points. As shown in the graph below, this has been going on for nearly 600 days now.
But of late the churning has been occurring in an increasingly narrow channel. Accordingly, the spring is being coiled ever more tightly.

This post was published at David Stockmans Contra Corner by David Stockman ‘ May 24, 2016.