The Fed Tries to Start Mopping Up Its Mess



Yeah right. That stuff stains fabrics, good luck with the clean up project.

MarketWatch:

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.

WaPo:

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!

Jr Deputy Accountant

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.

3 comments:

Anonymous said...

Locally there is a prediction coming out of uber conservative United Missouri Bank that the Fed will begin to increase the overnight rate come Summer. Seriously... stop laughing....really. I mean it. Yes, in the paper... seriously.

Jeff

http://www.stltoday.com/blogzone/mound-city-money/us-economy/2010/02/umbs-greiner-says-fed-will-raise-rates-this-summer/

LOLOLOLOLOL now *you* are the one making *me* spit out coffee on *my* monitor.

Oh that is precious!!

Anonymous said...

Did you like that? I thought you'd get a chuckle and a giggle out of that... You can bookmark that article and e-mail Mr. Greiner at UMB come Fall and see how it's going - I think he writes horoscopes and reads tea leaves on the side for a few extra bucks.

But JDA, to his credit, he did forecast correctly some Fed movement (upward) back in 2006. Then in 2007, he correctly forecast the Fed movement downward. He was a little off the mark in predicting that the Fed would begin cutting rates during the first half of the year when in fact, they didn't begin to trend downward until September 2007. From September to December 2007, the Fed lowered rates by one full percentage point. Winter of '08 was when they did the full court press and went down by 2 full percentage points. Don't kill the messenger - I'm just sayin'