FOMC Minutes: A Rift Develops

The latest FOMC Minutes from the September meeting of the Fed support my inflationary fears. While showing a rift between hawks and doves the Fed makes it clear that it will remain on the (fantasy) bid for whatever dead investment instrument comes along.

The Fed's staff forecasts is bullish as ever:

The information reviewed at the September 22-23 meeting suggested that overall economic activity was beginning to pick up...
In the forecast prepared for the September FOMC meeting, the staff raised its projection for real GDP growth over the second half of 2009 and over 2010.

The participants' current outlook confirm that the Fed is a boat drifting in the mist of data. It does not sound too optimistic fine-reading this

FOMC quote:

Despite these positive factors, many participants noted that the economic recovery was likely to be quite restrained.

followed by lingering fears of inflation despite a contraction in money supply M2:

A few continued to see some risk of substantial further disinflation, but that risk had eased somewhat further over the intermeeting period. Over a longer horizon, a few felt the risks were tilted to the upside.

OK, this comes long after the admission that the Fed mainly tries to contain inflation expectations - all the time patting their own shoulders to have been successful on this front in the past.
It does not change my view that surging commodity prices will surprise the world within the next 12 months, re-charging inflation again with oil bulding a base above $70 a barrel.

Comments

[CautiousInv...:]

I'm getting so jaded I think the minutes, rather than reflecting debate and discussion, have been reduced to another policy tool to manipulate markets into believing some are actually concerned about the potential inflation ( we know nobody cares about the dollar ). After talking about everything looking better and the risks of deflation exceeding risks of inflation, it's concluded that it is important to stay the course. And Bloomberg reported "some Federal Reserve policy makers were open last month to boosting the central bank’s $1.25 trillion mortgage-backed securities purchase program to stimulate the economy amid concerns the recovery may fade." I think they are more gripped by fear than they are bolstered by confidence.

Oct 14 03:34 PM

[Jason Rines...:]

I just wrote on the oil topic: ragingdebate.com/econo...

I know how you feel Cautious. Here is part of what to do about it Cautious: ragingdebate.com/polit...

The other part is to continue providing social network technology to as many writers as possible with the brains and guts to spread the truth. If nothing else, such emerging leadership will be ready to step up when this sham of a banana republic folds. Remember that historic quote I sent to you below. As for words of encouragement, remember that if history rythmes creating the Fatal Sequence so do the solutions.

A democracy is always temporary in nature; it simply cannot exist as a permanent form of government. A democracy will continue to exist up until the time that voters discover that they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy, which is always followed by a dictatorship. The average age of the world's greatest civilizations from the beginning of history has been about 200 years. During those 200 years, these nations always progressed through the following sequence:

From bondage to spiritual faith;
From spiritual faith to great courage;
From courage to liberty;
From liberty to abundance;
From abundance to complacency;
From complacency to apathy;
From apathy to dependence;
From dependence back into bondage.

Oct 14 04:12 PM

[Jason Rines...:]

Sorry to repost, just want to make sure you glanced at what I wrote.

A democracy is always temporary in nature; it simply cannot exist as a permanent form of government. A democracy will continue to exist up until the time that voters discover that they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy, which is always followed by a dictatorship. The average age of the world's greatest civilizations from the beginning of history has been about 200 years. During those 200 years, these nations always progressed through the following sequence:

From bondage to spiritual faith;
From spiritual faith to great courage;
From courage to liberty;
From liberty to abundance;
From abundance to complacency;
From complacency to apathy;
From apathy to dependence;
From dependence back into bondage.

On Oct 14 03:34 PM CautiousInvestor wrote:

> I'm getting so jaded I think the minutes, rather than reflecting
> debate and discussion, have been reduced to another policy tool to
> manipulate markets into believing some are actually concerned about
> the potential inflation ( we know nobody cares about the dollar ).
> After talking about everything looking better and the risks of deflation
> exceeding risks of inflation, it's concluded that it is important
> to stay the course. And Bloomberg reported "some Federal Reserve
> policy makers were open last month to boosting the central bank’s
> $1.25 trillion mortgage-backed securities purchase program to stimulate
> the economy amid concerns the recovery may fade." I think they are
> more gripped by fear than they are bolstered by confidence.

Oct 14 04:13 PM

[Socialism c...:]

Sorry, Mr. Rines...but I disagree! There is no reason why a democracy must necessarily fail. However, as noted by de Tocqueville, the moral goodness of the people dictate the outcome. God is not to be mentioned in public anymore...virtues are not taught in school, but rather "safe" indulgence. Etc. This nation survives or plummets soon...we are hanging by a thread. The deciding factor is whether the bulk of the populace wakes up to the moral crisis, or decides to persist in their "spiritual but not religious" moniker -- which is simply a euphemism for moral relativism...which always leads to moral anarchy and thereafter, societal breakdown.

Oct 14 06:10 PM

[Moon Kil Woong:]

Like all appointed officials, the Federal Reserve is also dominated by those wanting to stay in power. By neccesity that tends to mean that you try to soup up the economy past what is considered it's natural equilibrium constantly. This results in constant inflation, dollar depreciation, and abnormally low interest rates, all are which is in conflict to protecting our assets, the dollar, and soon to be in conflict with the Federal Reserve being able to hold us orderly Treasury Bond sales.

In short the Fed will always be motivated not by fear or greed, optimism or pessimism but by pure self-interest.

Oct 15 02:04 AM

[Michael Clark:]

Jason:
Is this yours, or did you quote it from someone:
From bondage to spiritual faith;
From spiritual faith to great courage;
From courage to liberty;
From liberty to abundance;
From abundance to complacency;
From complacency to apathy;
From apathy to dependence;
From dependence back into bondage.

I love it. And I guess we're getting closer to being back where we started. I wrote in an earlier post that it's time for the Republicans to vanish, and time for the Democrats to divide into Tories (those who support the Big Banks and Wall Street) and Whigs (those who don't). I'm sad to say it looks like Obama is now the leaders of the Tory Party.


On Oct 14 04:13 PM Jason Rines (iThinkBig) wrote:

> Sorry to repost, just want to make sure you glanced at what I wrote.
>
>
> A democracy is always temporary in nature; it simply cannot exist
> as a permanent form of government. A democracy will continue to exist
> up until the time that voters discover that they can vote themselves
> generous gifts from the public treasury. From that moment on, the
> majority always votes for the candidates who promise the most benefits
> from the public treasury, with the result that every democracy will
> finally collapse due to loose fiscal policy, which is always followed
> by a dictatorship. The average age of the world's greatest civilizations
> from the beginning of history has been about 200 years. During those
> 200 years, these nations always progressed through the following
> sequence:
>
> From bondage to spiritual faith;
> From spiritual faith to great courage;
> From courage to liberty;
> From liberty to abundance;
> From abundance to complacency;
> From complacency to apathy;
> From apathy to dependence;
> From dependence back into bondage.
>
> On Oct 14 03:34 PM CautiousInvestor wrote:

Oct 15 06:55 AM

[Daina Vincent:]

Excuse me Mr. Rines, not to be rude but you forgot to credit Alexander Tyler for the quote that you used. Cool essay here... www.snopes.com/politic...

Oct 29 05:00 AM