The Fed Tries to Start Mopping Up Its Mess
Pic by Troy Williams
Yeah right. That stuff stains fabrics, good luck with the clean up project.
The Federal Reserve's exit strategy may leave traditional rate hikes until 2012, said James Bullard, the president of the St. Louis Federal Reserve. The Fed may focus initially at mopping up the money that it has poured into the markets to keep credit flowing, he said "You could take back some of the quantitative easing, not in a really rapid way, but in a slow way as the economy improves -- that might be a helpful way to proceed while you are waiting for the day to raise interest rates," Bullard said in an interview with Fox Business News. On any decision to raise the Fed funds rate, Bullard said: "If you look at...how the FOMC has behaved in the past, it's been two-and-a-half to three years before we've raised rates after the end of a recession. So if you think the recession ended in the summer of 2009, two-and-a-half years later is a long ways -- it's all the way to 2012," Bullard said.
Better, WaPo has a piece in today's edition about mopping up their mess and a mission to make the project as transparent as possible. WTF, this isn't Julia Child stuffing a pork tenderloin, we don't need Ben Bernanke announcing each step. "And now we add the reverse repos and..."
Oh fuck it.
When you've flooded the economy with trillions of dollars, mopping up is no easy task.
That's the reality the Federal Reserve is confronting as it starts to explain how it will undo the aggressive growth-supporting steps that were put in place when the economy was in its deep dive -- and begins to be clearer about when that may happen.
But it is a fraught exercise. Federal Reserve leaders and private economists expect the jobless rate to remain high for years, despite a dip in the unemployment rate to 9.7 percent in January, and the Fed could make the situation worse if it moves too abruptly. In the meantime, financial markets have shown new signs of fragility, swooning in the past three weeks, including a 1 percent drop in the stock market Monday that drove the Dow Jones industrial average to close under 10,000 for the first time in three months.
Fed Chairman Ben S. Bernanke is betting that if the central bank is open about how it will phase out its expansive initiatives to prop up the economy, it will provide faith that the Fed will not allow inflation to flare down the road. That in turn would help keep long-term interest rates low and could allow the Fed to keep the short-term rates it controls at ultra-low levels for longer.
Again, we're looking at 2012 for a Fed rate hike which, of course, is hilarious if you pay attention to Mayan prophesy. Til doomsday, bitches!