After the Fed's Inaction

The market continues to digest the meaning of the Fed's inaction Wednesday. There was no increase in Treasury or other long-term asset purchases. There was no indication that an exit strategy was coming more into view. There was not heightened commitment, beyond what it has said in the past, to keep rates low. There seemed to be no protest of the recent firming of the effective Fed funds rate to the top of its policy range.

For the first time in a while, the Fed had the luxury of entering a wait-and-see mode. To the extent the statement changed, it was very subtle. In a small but significant way the Fed signaled that the risk of deflation had eased and recognized further stabilization/moderation of activity that still stops shy of recovery.

The fact that the Fed did not extend its long-term asset program or even tweak it, weighed on bonds amid disappointment. The Fed has completed about $170-$180 bln of its $300 bln Treasury purchases. It is on track to complete it in Sept. Hopes may linger into the August meeting that the Fed will extend its purchases. To the extent that technical factors, like the repayment of TARP funds, recent corporate tax payment and end of month/quarter/half year, are temporary, the Fed funds rate is likely to begin easing shortly.

Comments

[Mad Hedge F...:]

This is the 800 pound gorilla in the room. For those who missed the 70% move in the TBT this year, the double short Treasury bond ETF, another window is setting up for you to get in. After running up from $35 to a meteoric $60, we have backed off to $50. Similarly, the bond futures, which plunged from 142 to 112, have bounced back up to 118.5. I think the prospect of a retest of this year’s stock market lows triggered a lot of flight to safety buying of government paper in the last few weeks. If we don’t get that retest, which I think is unlikely, then it’s back to the races for the TBT. Things certainly aren’t getting any better on the fiscal front. According to the Congressional Budget Office, the national debt is now growing so fast, that it will reach 100% of GDP by 2023, seven years earlier than was predicted only 18 months ago. Some 90% of the increase came from burgeoning Medicare and Medicaid spending. It seems that hardly a week goes by without Congress passing another humongously expensive package that has wonderful long term benefits for the economy and society, but has to be paid for with hard cash dollars up front. Watch the TBT.

Jun 26 01:23 PM

[Ray Winter:]

If the web site libertyforlife.com is correct then it should not be a surprise the Fed does nothing.

This is what they say:-

Federal Reserve Bank (Inc.) A Murderous History?
Banksters, the Worlds Worst Gangsters
May 1, 1776 Jesuit Professor Adam Weishaupt who was retained by Rothschild's completes world dominance plan.
1776-1790: U.S. Independence - Free Banking -no formal central bank.
1791-1811: First Bank of the United States.
1816-1836: Second Bank of the United States.
1837-1862: Free Banking Era -no formal central bank.
1862-1913: System of National Banks (Consequence of Lincoln's War).
1914-crrent: A consortium of 12 privately held banks called the Federal Reserve Bank. The largest share holder of the bank are the Rothschild's of London.
The accomplishments of the Rothschild's and fellow banksters is nothing short of astonishing. They have literally got the world to hand them the right to manufacture money out of nothing and then to turn around and lend the mammon back to the world plus usurious interest! Almost singlehandedly, this small group of men have dominated the world. However, in their efforts to dominate the world they have caused extraordinary pain and agony and even potentially the complete destruction of life on earth.
The Federal Reserve Bank is a consortium of twelve private banks which are not part of the United States Government.
These private banks purchase paper notes from the U.S. mint for printing cost or simply enter digital money into their computer then lend back the money plus interest to the people through member banks. The profits go into the share holders of the bank's pocket's, the U.S. public receives no benefit.
The Primary Owners of the Federal Reserve Bank Are:
1. Rothschild's of London and Berlin
2. Lazard Brothers of Paris
3. Israel Moses Seaf of Italy
4. Kuhn, Loeb & Co. of Germany and New York
5. Warburg & Company of Hamburg, Germany
6. Lehman Brothers of New York
7. Goldman, Sachs of New York
8. Rockefeller Brothers of New York
All the primary owners are branches of European establishments. Foreigners, almost entirely Jewish, control the United States Money supply. They literally own exclusive rights to the dollar and simply enter dollars into their banks books to make money which they then lend back to us at a profit. For them money does not grow on trees, it is simply a data entry into their account. Clearly the private ownership of the U.S. Dollar is by far The Greatest Crime of the Century. The owners of this bank have been responsible for instigating all the major wars and depressions in the last 100 years. They own the bank, they own the dollar and they own all the major media channels, the military industrial complex and most politicians, judges and cops.
Sometimes the bank pays an arbitrary 'franchise fee' to the U.S. government to keep the politicians paid off.
The first two private National Banking Systems lasted about 20 years before being eliminated. The current Federal Reserve Bank private National Bank has lasted nearly 100 years.
In Producer Aaron Russo's must see Movie "AMERICA: Freedom to Fascism", when interviewing Congressman Ron Paul, Aaron asks: "So the Federal Reserve is actually an illegal entity functioning within the Federal Government?" Ron Paul's response: "It's illegal. And what we have given to this so-called agency is the authority to counterfeit money."
The cost of this system to the U.S. public is hundreds of billions of dollars every year while holding the nation and people in a constant state of debt.
There have been assassination attempts on every President who attempted to eliminate these private National Banks. The privately held Federal Reserve Bank has not once been audited and never pays any income tax on their astonishing income.
The bank is supposed to bring stability to the economy, however, almost every major marked crash and war can be attributed to the Federal Reserve Bank, including the Great Depression, WW I, WW II, the Gulf War etc.
In 1913 in exchange for paying for his Presidential campaign, President Woodrow Wilson signed the Federal Reserve Act handing over the U.S. currency to twelve regional private banks. In 1933 Roosevelt confiscated citizens gold and handed it to these private banks.

Jun 27 03:25 AM

[johnbee:]

This is wait and see time re deflation/inflation for the Fed while trying to keep everything on an even keel, and that includes the $, interest rates, stocks, gold, and oil. Quite a balancing act but anyone who bets either way against it right now is taking a lot of risk.

Jun 27 05:48 AM