Sep 162015
 
 September 16, 2015  Posted by at 10:13 am Finance Tagged with: , , , , , ,


NPC Fire at S. Kanns warehouse, Washington, DC 1908

It’s highly amusing to read all the ‘expert’ theories on a Federal Reserve hike or no hike tomorrow, but it’s also obvious that nobody really has a clue, and still feel they should be heard. Don’t know if that’s so smart, but I guess in that world being consistently wrong is not that big a deal.

Thing is, US economic numbers are so ‘massaged’ and unreliable, the Fed can pick whichever way the wind blows to argue whatever decision it makes. As long as jobs numbers get presented for instance without counting the 90-odd million Americans who are not in the labor force, and a majority of new jobs are waiters, just about anything goes in that area. Numbers on wages are just as silly.

And people can make inflation a big issue, but hardly anyone even knows what inflation is. Wonder if the Fed does. It had better, because if you don’t look at spending, prices don’t tell you a thing. They surely must look at velocity of money charts from time to time?!

The biggest thing for the Fed might, and perhaps must, be the confidence factor. It’s been talking about rate hikes for so long now that if it decides to leave rates alone, it will only create more uncertainty down the road. Uncertainty about the economy (no hike would suggest a weak economy), and also about its own capabilities.

If all you have is talk, people tend to take you a lot less serious. Moreover, the abject -and grossly expensive- failure of the Chinese central bank to quiet down its domestic stock markets has raised questions about the omnipotence of all central banks.

This morning’s spectacle of a 5% rise in Shanghai in under an hour near the close no longer serves to restore confidence, it further undermines it. Beijing doesn’t seem to get that yet. But the Fed might.

No rate hike is therefore an enormous potential threat to Fed credibility. And that’s a factor it may well find much more important than a bunch of numbers it knows are mostly fake anyway. It has for years been able to fake credibility, but that is no longer all that obvious. And delaying a hike will certainly not boost that credibility.

Sure, volatility is an issue too, but volatility won’t go down on a hike delay. It’ll simply continue – and perhaps rise- until the next meeting. There’s nothing to gain there.

Besides, don’t let’s forget how crazy it is that the entire financial world is dead nervous ahead of a central bank meeting, even as everyone knows it’s all just about a decision on a very small tweak in rates.

Yellen et al are very aware of the risks of that, even if they love the limelight it brings. All that attention tells people, meeting after meeting, that the US economy is not functioning properly, no matter what the official statements say.

There are ‘experts’ talking about the dangers of emerging markets if the Fed votes Yes on a hike, but those markets are not even part of its mandate. if Yellen thinks something can be gained from pushing emerging markets and currencies down further, she’ll do just that.

Still, all this is just pussyfooting around the bush. The Fed may have noble mandates to help the real economy, but it will in the end always decide to do what’s best for Wall Street banks. And these banks could well make a huge killing off a rate hike.

They can profit from trouble and volatility in emerging markets as well as domestic markets, provided they’re well-positioned. Given that they’ve had ample time, and it’s hard to answer the question who else is in a good position, we may have an idea which wind the wind will blow.

Increasing credibility for the Fed and increasing profits for Wall Street banks. Might be a winning combination. And if Yellen is realistic about the potential for a recovery in the American economy, why would she not pick it?

Home Forums Will The Fed Pick A Winning Combination?

This topic contains 6 replies, has 7 voices, and was last updated by  bluebird 4 years, 1 month ago.

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  • #23918

    NPC Fire at S. Kanns warehouse, Washington, DC 1908 It’s highly amusing to read all the ‘expert’ theories on a Federal Reserve hike or no hike tomorro
    [See the full post at: Will The Fed Pick A Winning Combination?]

    #23922

    Dr. Diablo
    Participant

    You could double or triple blind it by suggesting that, now that the Fed (who is the insider banks) has sold the planet on debt unprecedented in galactic history (by those banks, which are the Fed, which are the banks) then the best thing to do now is “fail”. –Accidentally or on purpose, don’t care, doesn’t matter. That is to say, to cause a Deflationary accident, sparked by the Fed, who are the banks, that make the repayment of those loans occur in even “thicker”, more valuable dollars/currency, transferring even more power to you and your friends, and as in Greece or Syria, killing millions.

    Because the opposite is, the banks lent all that money and they voluntarily lose on those loans, and the little people and emerging nations win, limiting U.S./Fed/Bank power? When the Fed is on record as being owned by the banks, then why do we have this illusion the Fed is a quasi-government institution, a “regulator”, or some sort of control or bulwark on the bank/financial powers? Why would we think they would do what is good for the U.S. or its people? If the 5 mafia families got together and created an organization, would you think they would regulate themselves out of profits? No. Naturally they would regulate themselves into internal order the better to have a monopoly over business in their territory and extract more vigorish. They are the same entity, legally, per their own ownership. Take the mask off and stop talking to the illusion or your thinking will be clouded.

    Seen this way, they will do what it best for their power and profits. In their world, there is NO reference to ‘the economy”, “the United States”, “employment,” “GDP strength,” the welfare of the world via the reserve currency, or anything else. Why should there be? Their only reference is them. That may make it simpler to guess what they will do next.
    1) Protect the illusion.
    2) …
    3) Profit!

    #23924

    seychelles
    Participant

    Mish: A quarter-point hike will not cause anything. The causes are already baked in the cake. https://globaleconomicanalysis.blogspot.com/2015/09/ben-bernanke-vs-john-hussman-beauty-of.html#q3JH3c4DrufuqXD4.99

    “..it will in the end always decide to do what’s best for Wall Street banks. And these banks could well make a huge killing off a rate hike.They can profit from trouble and volatility in emerging markets as well as domestic markets, provided they’re well-positioned.”
    Now you’re thinking like a central banker. Prechter has always maintained that the upcoming debacle will be curtains for central banking, at least in any time frame that we could care about. The Fed should show a little chutzpah ascending the gallows.

    #23927

    rapier
    Participant

    The rule for anyone who has a hand in policy or in finance now is, and has been increasingly for 30 years, that in every possible short term lower rates are better. The increasing part is obvious now in that it’s impossible to find anyone mainstream who thinks it is a good idea.

    That said how is the Fed going to raise rates? Words, or do they have a magic wand.

    It’s best to read this to get a handle on the mechanisms involved. Words or magic wands won’t do it.

    New York Times Describes New Fed BaBIRP Policy In Its Fed Interest Rate Explainer

    #23928

    Ken Barrows
    Participant

    “Investors” don’t care about Fed “credibility.” They do care about the Fed put, though. If the Fed can raise but convince those who matter that the put is there… voila!

    #23929

    sculptor
    Participant

    Well, I just “sold the news” and went short. we’ll see friday at option expiry if that was the right zig. Its just that everyone got so optimistic…a sure tell that the let down is around the corner.

    bottom line is this its: the fed is not making a bonifide financial decision, its a propaganda announcement. the effect on markets is psycho-illusionary, and because its not a real market, the effect will be orchestrated.

    #23943

    bluebird
    Participant

    So Friday morning the markets are down. The Fed did not hike rates and the Fed is losing credibility. This is good for Wall Street banks?

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