Bernanke's Second Term and More Fun Poking at the Fed
Kliguy38 got me really excited... and then totally let me down. Typical.
Bernanke Out as Fed Head:
Breaking news on CNBC. Yes I watch CNBC. I have to know where the herd is. Steve Leisman was blowing Ben on the AM slot. Steve was "fawn eyed" holding his charts showing there were 12 days before Ben's confirmation expired. I believe he broke down and cried briefly. Ummmm no....satire again. Ben will be easily confirmed but the Senate is showing their protest to the "real power" by dragging their feet.
I agree. Bernanke's confirmation (or lack thereof... zzzzz) is a non-issue. Here's what I'd like to discuss: how is it we are able to conduct Treasury auctions in the $100s of billions each and every week? Who is buying this crap? In July of 2009, we tried to unload $235 billion in a single week. If Treasury kept that pace for the entire year, we'd have issued over $104,000,000,000,000 of debt in a year, who the fuck has money like that? "foreign central banks" LOL (don't quote me on that number and feel free to crunch it yourself. fuck math.)
Anyway. Please don't trap me with headlines like that again.
Even though Kliguy tricked me into getting worked into a lather over nothing, he's right to point out the clear signal the Fed is trying to send on interest rates. Too bad they distorted the market and no one can hear it, that might not translate well for these inflation expectations that everyone is always talking about.
It is clear that the Fed's plan is to keep its interest rate target close to zero until there is a significant improvement in the US employment situation. It's not likely that there will be any improvement in the US employment situation over the next 12 months, so does this mean that the Fed Funds rate will remain near zero for at least another year?
Whether it does or not will largely be determined by inflation expectations. As the "Austrians" have always known and as the "Keynesians" discovered to their amazement during the 1970s, a high rate of unemployment will not prevent the prices of goods and services from rising in response to rapid money-supply growth. Rising prices lead to rising inflation expectations, and once inflation expectations exceed a certain level it will become necessary for the Fed to hike its targeted interest rate regardless of what the employment situation happens to be at the time. The reason is that if the Fed refuses to boost the overnight interest rate in the face of rising inflation expectations, then long-term interest rates -- including interest rates on adjustable-rate home mortgages -- will begin to accelerate upward.
I totally see them bumbling their way in the dark through this because they've already admitted extraordinary circumstances are at work. That may be roughly translated from Fedspeak into we have no fucking idea what we are doing.